Russia Benefits As Oil Prices Climb Amid Conflict

Russia is well placed to emerge as one of the main beneficiaries of the expanding conflict in the Middle East. Know how?

In a geopolitical context, countries often construct or exaggerate a foreign threat—a “boogeyman”—to foster internal unity, increase defense spending, and distract from domestic issues. Sometimes, countries don’t even need to exaggerate the situation to do so.

The US–Israel conflict with Iran is now in its second week. Before that, Russia’s economy was in a state of “negative equilibrium,” showing signs of severe stress after four years of war in Ukraine. On top of this, the United States and European nations significantly reduced purchases of Russian energy after last year’s policy of penalizing countries that bought it. Energy revenues plunged to their lowest level since 2020. The government even had to consider some reductions in military expenditure.

Suddenly, Moscow received a potential lifeline. Israel and the United States attacked Iran. As Tehran retaliated, the conflict spread into shipping through the Strait of Hormuz, sending oil prices soaring. Russian oil that struggled to find buyers until last week is now a hot commodity. The soaring prices of oil and natural gas will directly lead to higher profits for Russian producers.

Russia is among the world’s largest oil exporters. Before it invaded Ukraine in early 2022, the country was the world’s third-largest oil producer and among the world’s top three exporters—a position it maintained last year despite sanctions.

Russia knows how to make the most of the current scenario. On Monday, pro-Kremlin commentators circulated a The Wall Street Journal article predicting oil prices could skyrocket to $215. Instead of selling at a discount, Russian crude is now fetching premium prices from its main buyers. What’s more, they may even have Washington’s blessing. The US has eased some sanctions, allowing purchases by key buyers of Russian crude. This is already benefiting Russia’s economy and, ultimately, its war against Ukraine.

However, energy experts say it’s too early for Moscow to celebrate. Russia would need high oil prices for nearly a year to truly ease its economic pressure, as short spikes only delay the difficult decisions ahead. With every day of fighting, the U.S. might also deplete the weapon stocks that Ukraine relies upon to defend itself.

All of this leads to one particular point: the longer the conflict lasts, the more the strategic advantages may shift toward Russia.