The War Russia Didn't Fight Is Funding the One It Did

Russia's Budget Before the Iran War: Near Crisis

In January and February 2026, Russia's federal budget deficit reached 3.45 trillion rubles ($42 billion), or 1.5 percent of GDP, according to the Russian Finance Ministry — cited by Meduza, the independent Russian news outlet. The full-year deficit target was 3.79 trillion rubles ($46 billion), or approximately 1.6 percent of GDP. In just two months, Russia had already burned through 91 percent of its entire annual deficit allowance. (Source: Meduza, March 26, 2026, citing Russian Finance Ministry.)

The driver: oil and gas revenues collapsed by 47.1 percent compared with the same period in 2025. In January alone, Russian oil and gas revenues fell to 393 billion rubles ($5.1 billion) — a five-year low — as sanctions, Western price cap enforcement, and lower global oil prices squeezed the Kremlin's primary income source. (Source: The Moscow Times, February 6, 2026, citing Finance Ministry figures.)

Russia's 2026 budget had been built around a Urals crude price assumption of $59 per barrel. By January, Urals was trading well below that. To plug the widening gap, the government borrowed on domestic markets and drew down the National Wealth Fund — Russia's sovereign oil savings account. The fund's liquid assets had already shrunk by more than half since the Ukraine war began, and nearly 400 billion rubles ($4.8 billion) were pulled from it in January-February alone. (Source: Meduza, March 26, 2026.)

Meanwhile, government spending rose 5.8 percent year-on-year in the same period — front-loaded, per Finance Ministry guidance. In January and February, revenues totaled 4.8 trillion rubles ($55.8 billion) while spending reached 8.2 trillion rubles ($95.36 billion), according to The Moscow Times. (Source: The Moscow Times, March 19, 2026.)

What the Iran War Did to Russia's Numbers

The US-Israeli strikes began on February 28. Tehran closed the Strait of Hormuz. Oil prices surged.

Russia's Urals crude — which trades at a discount to Brent — rose from approximately $45 per barrel in February to roughly $75 per barrel in March, according to AP. Separately, AP noted that Brent crude had risen above $82 by the time of its reporting — up from $72.87 on the eve of the attack. (Source: AP News, March 2026.)

Urals at $75 per barrel is now above the $59 benchmark assumed in Russia's budget plan. That means every barrel Russia exports is generating budget revenue that simply did not exist in the pre-war planning scenario. Oil and gas tax revenues have historically accounted for 30 to 50 percent of the Russian federal budget, according to the Oxford Institute for Energy Studies — but by early 2026, the share had fallen to approximately 17 percent of revenues as sanctions and low global prices took effect, per The Moscow Times. (Source: AP News, March 2026.)

Meduza's analysis concluded that the Iran war windfall "could allow the Kremlin to hold the annual deficit to its target of 1.6 percent and keep military spending at the top of its priorities." The qualifier is important: the windfall covers the gap, but doesn't solve deeper structural problems. (Source: Meduza, March 26, 2026.)

Expert Assessments: How Much, For How Long

Simone Tagliapietra, energy expert at the Bruegel think tank in Brussels, told AP: "Russia is a big winner from the war-related energy turmoil. Higher oil prices mean higher revenues for the government and therefore stronger capability to finance the war in Ukraine." (Source: AP News, March 2026.)

Robert Person, nonresident Senior Fellow with the Eurasia Program at the Foreign Policy Research Institute, told Time: "Putin and his advisors have likely determined that war in Iran serves Russia's interests in the short term: higher energy prices, global distraction from a Ukraine war that Putin is not ready to settle, and America at risk of entrapment in another Middle Eastern quagmire." (Source: Time, March 2026.)

Alexandra Prokopenko, an expert on the Russian economy at the Carnegie Russia Eurasia Center in Berlin, described three scenarios for AP:

• Quick resolution: Brent returns to roughly $65 per barrel — "a short-lived spike would not fundamentally change" Russia's budget picture.
• Middle scenario: Some shipping resumes, oil stabilizes at around $80 per barrel — gives Russia "some fiscal relief," depending on duration.
• Long-term closure with infrastructure damage: Oil could reach $108 per barrel — "This scenario would bring the largest windfall to Russia."

(Source: AP News, March 2026, citing Prokopenko.)

Chris Weafer, CEO of Macro-Advisory Ltd consultancy, told AP that even several weeks of Gulf LNG disruption could lead European countries to reconsider plans to ban new Russian supply contracts after April 25. "Countries such as Hungary and Slovakia and those who have been big buyers of Russian LNG, will press for that review," he said. In any case, "the Russian federal budget will have a much better result in March," he added. (Source: AP News, March 2026.)

Sweden's Defense Chief: Russia Is "Pouring" the Money Into Ukraine

Sweden's defense chief publicly stated this week that Russia is taking direct advantage of the Iran war by channeling increased oil revenues into its Ukraine campaign. The characterization — that Russia is "pouring" windfall energy money into the Ukraine war effort — is the most direct senior official statement yet linking the Iran war's economic effects to Ukrainian battlefield outcomes. Sweden is a NATO member that joined the alliance in 2024 and has significant defense intelligence exposure to Russian military activities. The specific financial figures supporting the claim were not publicly detailed beyond the AP and Meduza reporting above. (Source: The Hill/AP, March 26, 2026.)

The US Sanctions Reversal

US Treasury Secretary Scott Bessent issued a 30-day waiver on the 25 percent tariff Trump had imposed on India over its purchases of Russian oil. The decision was driven by rising US domestic gas prices. Bessent told Fox Business: "Yesterday, the Treasury agreed to let our allies in India start buying Russian oil that was already on the water. We may sanction other Russian oil." In an X post on Thursday, Bessent characterized the waiver as "deliberately short-term" and argued it "will not provide significant financial benefit to the Russian government as it only authorizes transactions involving oil already stranded at sea." (Source: Time, March 2026, citing Bessent on Fox Business and X.)

The sanctions relief, combined with elevated oil prices and increased Asian demand for Russian supply as Gulf alternatives become constrained, positions Russia as what Amena Bakr, head of Middle East and OPEC+ insights at data and analytics firm Kpler, described: "With Middle East barrels facing logistical disruption, both India and China face strong incentives to deepen reliance on Russian supply." (Source: AP News, March 2026, citing Bakr.)

Russia's own leadership has publicly acknowledged the dynamic. Kremlin spokesman Dmitry Peskov said there is "a significant increase in demand" for Russian energy products "in connection with the war in Iran." (Source: Time, March 2026.)

The Limits of the Windfall

Multiple analysts emphasize the windfall does not fix Russia's underlying structural economic problems. Meduza's analysis noted the Iran war revenue covers the budget gap but doesn't address the deep structural pressures from five years of war spending, high inflation, military labor market distortions, and capital flight. The Moscow Times summarized earlier analysis showing Russia needs sustained high prices over many months — not a spike — to meaningfully reverse its fiscal deterioration. (Sources: Meduza; The Moscow Times.)

Oil and gas revenues' share of Russia's federal budget had already fallen from 45 percent in 2021 to around 20 percent in 2025, according to Time, as the sanctions regime took effect and Russia was forced to sell at discounts. The Iran war is restoring some pricing power, but the structural diversification away from hydrocarbons that Russia was forced into is not reversible in the short term. (Source: Time, March 2026.)

The Kremlin's preferred outcome, per Meduza's analysis, is "a moderately prolonged conflict that keeps prices elevated" — not a full-blown global recession that would crush oil demand globally, including Russia's. That interest in a sustained but contained conflict is at least partly what shapes Moscow's posture: publicly calling for ceasefire, materially supporting Iran's war effort, and collecting windfall revenues in the meantime.

Why This Matters for Ukraine

Ukraine's situation is the direct flip side of Russia's improved fiscal position. Zelensky has warned that Ukraine will face an air defense missile deficit while Washington is focused on the Iran war. Russia used 948 drones against Ukraine in a single 24-hour period this week — the largest aerial attack in that war's history. (Source: BBC News, March 24, 2026.)

The arithmetic is straightforward: every additional dollar Russia earns from higher oil prices goes, partially, into funding the same war that has killed tens of thousands of Ukrainians and displaced millions more. The Iran war, which Ukraine had no role in starting, is making the Russia-Ukraine war more expensive for Ukraine to fight and less expensive for Russia.