Kremlin panics as Russian Urals crude oil price nears crucial $50 mark

The Kremlin on April 7 announced it is “closely monitoring” oil markets after the price of its key export grade, Urals crude, plunged towards the $50 mark.

“We are very closely monitoring the situation, which is currently characterized as extremely turbulent, tense, and emotionally overloaded,” Kremlin spokesperson Dmitry Peskov told Interfax.

Peskov attributed the price decline to "the US decision to introduce tariffs for most countries in the world."

Urals crude fell to $52.76 per barrel at the Baltic port of Primorsk on Friday, according to Argus Media data cited by Bloomberg.

This is well below the $70 per barrel benchmark used for Russia's 2025 budget planning.

With oil and gas revenues accounting for nearly 30% of budget proceeds in January-February, according to government data cited by Bloomberg, the price decline poses significant fiscal challenges.

A price collapse could destabilize Russia's federal budget, as military expenditures for the Ukraine conflict have driven government spending sharply upward in early 2025.

If prices fall below the $50 mark, it would push Russia's key oil export to its weakest level in nearly two years.

As recently as late March, global oil prices were actually rising, driven by U.S. sanctions on Iran and ongoing discussions on a potential ceasefire in Russia's war in Ukraine, with Brent crude reaching $72.52 a barrel, while U.S. West Texas Intermediate crude increased to $68.68.

Despite this, Russian oil and gas revenue fell by 17% year-on-year in March to 1.08 trillion rubles ($12.8 billion), as forced discounts on crude and a stronger ruble hit budget inflows, the Moscow Times reported on April 3, citing Russia's Finance Ministry data.

The ministry said the government lost roughly 230 billion rubles ($2.7 billion) in tax income compared to March 2024, with oil and gas revenues accounting for one-third of the total state income.

Energy revenues remain a key source of financing for the Kremlin's war against Ukraine, despite Western sanctions and a price cap designed to limit Moscow's earnings from oil exports.