Central Bank Chief: Declining Oil Prices Pose Risk to Russias War Financing

The head of Russia’s Central Bank issued a warning on Tuesday that declining global oil prices could put pressure on the nation’s public finances. This situation has raised the hopes of some individuals in Ukraine that Moscow might face difficulties in financing its military operations as a consequence.

Oil prices have decreased amid increasing concerns of a recession, exacerbated by President Donald Trump’s rigorous tariff strategies. Approximately one-third of Russia’s annual budget is derived from energy revenues.

Central Bank chief Elvira Nabiullina expressed to Russian lawmakers that trade disputes «generally result in reduced global trade and possibly [a decrease in] demand for our energy supplies.» She acknowledged the risks involved, stating, «We always prepare for such eventualities.»

The Finance Ministry reported on Tuesday that Russia’s oil revenues had dropped by 10% year-on-year in the first quarter, totaling $31 billion, and cautioned that further declines could occur «due to the deteriorating price conditions.»

Ukraine, which has been vocally critical of nations that still purchase Russian energy, expressed on Monday its hope that the fall in prices would restrict funding for the Kremlin’s military budget.

Andriy Yermak, the chief of staff to Ukrainian President Volodymyr Zelensky, remarked on social media, «The lower the oil prices, the less financial support Russians will have for their war efforts.»

Currently, Russia’s benchmark Urals crude is trading around $50 a barrel, marking a 15% drop since March and reaching its lowest point since 2023, according to market data.

President Vladimir Putin noted last year that Russia allocated nearly 9% of its GDP to defense and security, a level not witnessed since the last years of the Soviet Union.

Economist and investor Yevgeny Kogan told AFP that while there might be a reduction in defense spending, any effect would likely be minimal and delayed. «There could be a slight decline, but probably not immediately,» he stated.

Russia’s financial reserves remain robust. As of March 1, the National Welfare Fund—which serves as a reserve fund accumulated from years of oil profits—held approximately $138 billion in assets, with around $39 billion deemed «liquid» and readily available for conversion into cash.

When questioned about the decrease in oil prices, Kremlin spokesman Dmitry Peskov stated on Monday that Russian officials are «monitoring the situation very closely to mitigate the effects of the economic turmoil.»