Oil surge won't save Russia's economy from recession – Bloomberg
Photo: High oil prices won’t save Russia (Getty Images)
A sharp rise in oil prices driven by the US-Iran conflict will not save Russia’s economy from recession, as structural problems remain too deep, analysts say, according to Bloomberg.
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Oil is rising, but it won’t help Russia’s economy
Higher oil prices due to the US-Iran conflict are boosting Russia’s export revenues to their highest level since the first weeks of the full-scale invasion of Ukraine in 2022.
However, according to Bloomberg, this is unlikely to accelerate economic growth, especially amid some of the highest borrowing costs in the world.
Russia’s GDP is shrinking
Bloomberg estimates that Russia’s GDP likely declined in the first quarter of 2026. Output fell by nearly 2% in the first two months of the year — the first quarterly drop since early 2023. The business climate index in Russia also turned negative last month for the first time since 2022.
Even Russian President Vladimir Putin publicly acknowledged the problems, demanding last week that ministers and the central bank explain why the economy is slowing.
Money exists — but not where it’s needed
The key issue facing Russian officials is that budget spending is boosting demand but not production. Resources are increasingly directed into the military-industrial complex, much of whose output is ultimately destroyed on the battlefield.
If the Russian government decides to spend additional oil revenues beyond planned levels, it would increase inflationary pressure. This would give the central bank further reason to keep interest rates high, which are already weighing heavily on businesses.
Russia itself doubts high oil prices
Despite market gains, Russian officials remain skeptical. According to sources familiar with the new macroeconomic forecast, the government plans to keep its baseline assumption unchanged — an average oil price of $59 per barrel for 2026.
At the same time, a stronger ruble is expected, which would mean lower oil revenues than projected in the budget.
“Expensive oil may help exporters, who account for roughly a quarter of budget revenue, but it cannot offset falling output and stalled investment under such tight fiscal conditions,” Bloomberg writes.
Under current Russian law, all oil revenues above $59 per barrel are directed to the National Wealth Fund. At the same time, the 2026 budget does not предусматривает using this fund to cover the deficit.
As previously reported by RBC-Ukraine, the Kremlin is deliberately distorting economic statistics. According to the report, official figures do not reflect the real state of Russia’s economy, complicating the assessment of its actual losses from sanctions and the war.
Meanwhile, Ukraine’s kinetic strikes on Russian infrastructure have significantly reduced the effectiveness of some international sanctions.
RBC-Ukraine also reported that the destruction of key facilities has effectively paralyzed certain production chains that the West had been trying to restrict by other means.
