By Max Gardus
Trump’s war brought Russia $30 billion — but that is not enough. In the future, if there is a de-escalation, oil production could face stagnation or even decline.
What is interesting about this story is that the report is not the product of assessments by Western analysts, Russian émigrés, or Ukrainian sanctions experts. This picture is painted by Andrey Klepach, a former Russian deputy minister of economic development and, at the time the report was prepared, chief economist at the state-owned VEB.RF. He was very much a system insider and scholar-official who consistently supported the “goals of the special military operation,” referred to the Donetsk, Luhansk, Kherson and Zaporizhzhia regions as Russia’s “new regions,” and proposed a separate development model for them. In May 2026, however, he published a gloomy forecast for the Russian economy — and in August he was dismissed.
His report, The Russian Economy and Geopolitical Challenges, is particularly interesting because it shows how part of Russia’s own economic establishment views the relationship between sanctions, the war in the Middle East, oil revenues and the state of the federal budget. And the picture it paints for the Kremlin is far from optimistic.
By late 2025 and early 2026, oil sanctions had begun to work exactly as intended. India sharply reduced its purchases of Russian oil, China did the same, while Turkey stopped buying some Russian petroleum products. Klepach writes explicitly that “everything was proceeding according to the sanctions scenario.” Had this situation continued throughout the year, the VEB Institute estimated that the Russian budget would have received around 2–2.5 trillion rubles less than envisaged in the budget law.
But then came the attack on Iran — “thanks to Trump and the war in the Persian Gulf, we got temporary relief and a surge in oil, gas and fertiliser prices.”
The blockade of the Strait of Hormuz and the risk of an oil shortage sent global prices sharply higher. As Klepach himself puts it, Russia received a “temporary respite” thanks to higher prices for oil, gas and fertilisers. This is clearly reflected in VEB’s scenarios. Under a relatively short conflict, the average Brent price in 2026 is estimated at around $89 per barrel, with Urals at $68. Under a more prolonged conflict, the figures rise to $103 and $83 respectively.
At the same time, Russia’s main gain does not come from a dramatic increase in the physical volume of exports. In 2025, Russia exported 231 million tonnes of oil. Under VEB’s first scenario for 2026, exports rise to 239 million tonnes — an increase of only 3–4%. But total revenues from exports of fuel and energy products increase much more significantly because of higher prices. It is the global energy shortage that temporarily weakens the impact of sanctions on Russian exports: the world needs oil, and there is less scope to push Russian barrels entirely out of the market.
But the sanctions have not disappeared.
Even during the oil price shock, Urals remains cheaper than Brent. In other words, Russia receives only part of the global price premium.
Klepach explicitly warns that the benefits from the war in the Gulf will primarily be felt in 2026 and, perhaps, in early 2027. Once the global market potentially normalises, sanctions pressure could once again manifest itself in full.
There is also a second source of pressure: Ukrainian strikes. The report already describes the damage caused by strikes on Russia’s port, oil and gas, chemical and logistics infrastructure as a “significant macroeconomic barrier” to growth. VEB acknowledges that, rather than expanding, the Russian oil industry may be entering a period of decline, with production potentially failing to exceed 500–505 million tonnes.
In other words, sanctions and Ukrainian strikes are targeting different parts of the same system. Sanctions make it harder to sell oil and reduce the price Russia receives for it. Strikes on refineries, ports and transport infrastructure reduce Russia’s ability to process that oil and physically export it.
It is particularly telling that VEB separately models strikes on export infrastructure as a factor capable not only of reducing exports but, in the event of further escalation, of forcing Russia to cut oil production itself.
But the most interesting part comes next. The war against Iran gives Russia tens of billions of dollars in additional export revenues — yet generates almost no economic growth. Under the first scenario, Russian exports increase from $422 billion to $498 billion in 2026. GDP, however, grows by just 0.3%, while investment falls by 2.5%.
Even under the considerably more favourable second scenario, in which exports reach $566 billion, GDP grows by only 0.6%, while investment declines by 1.7%. This is why Klepach writes that the Middle East conflict has given the economy “additional breathing room,” but that its positive effect on the real economy will be limited.
Some of the additional oil revenues go into reserves, some leave the country through capital outflows, and some support the budget. In other words, the Russian economy is becoming increasingly ineffective at converting oil rents into investment and long-term growth.
And then comes 2027.
Under VEB’s short-conflict scenario, the price of Urals falls from $68 to $48 per barrel. Russia’s total exports decline from $498 billion to $414 billion — even below the 2025 level.
The most painful impact is on the budget.
Under Klepach’s scenario, federal oil and gas revenues fall from approximately 9.1 trillion rubles in 2026 to 6.8 trillion in 2027. Total budget revenues come in around 3.3 trillion rubles below plan. At that point, the problem extends well beyond the oil industry.
Defence spending remains elevated. Klepach therefore explicitly warns of the risk of cuts to so-called “development expenditures” — science, education, infrastructure and national projects.
The mechanism is straightforward: cheaper oil means lower budget revenues, which means a larger deficit, spending cuts and less investment in the future.
Even a prolonged war in the Middle East does not fully solve the problem. High oil prices can sustain oil and gas revenues, but the broader economy weakens — and with it, the non-oil-and-gas tax base.
VEB’s medium-term forecast is therefore quite revealing. Under the baseline scenario, the price of Urals falls to $48–57 per barrel after 2026 and does not return, even by 2030, to the levels generated by the Middle East shock. VEB itself states explicitly that the positive effect of higher oil prices will be exhausted by 2028.
If this is combined with a new tightening of sanctions and continued Ukrainian strikes on industrial and transport facilities, Klepach estimates Russia’s potential GDP growth in 2027 at just 1–1.5%.
This leads to an important conclusion when assessing sanctions. High Russian oil revenues during a global energy shock should not be taken as evidence that sanctions “do not work.” By early 2026, the sanctions mechanism had already begun putting pressure on Russian exports and the federal budget. The war against Iran simply changed global market conditions dramatically and temporarily offset that effect.
Iran bought the Kremlin time.
But it solved none of the problems that made Russia need that time in the first place.
