War in the Middle East and Russian Oil

March 16, 2026

The war in the Middle East has significantly affected oil prices worldwide. Rising oil prices will benefit Russia, the world’s third-largest oil producer.

Waivers for Russian Oil

On March 13, the United States issued a 30-day waiver allowing countries to buy Russian oil and petroleum products currently stranded at sea as a step to stabilize global energy markets disrupted by the Iran war. The waiver is expected to run until April 11, 2026, and authorizes the delivery and sale of Russian crude oil and petroleum products loaded on vessels on or before March 12.

This is already the second waiver related to Russian oil. Another 30-day waiver allows India to purchase Russian oil, despite previously imposed sanctions related to the war in Ukraine.

These waivers effectively “legalize” tens of millions of barrels of Russian oil that had already been purchased and paid for. As a result, the impact of these waivers on the oil market is limited. However, the waivers have generated significant optimism in Russia, where they are viewed as a diplomatic success.

Price of Russian Oil

The Urals price benchmark, which is currently fluctuating around USD $90 per barrel, may not reflect the actual price of most Russian oil because it is calculated based on the spot market. This benchmark is used to calculate taxes on Russian oil. A significant portion of Russian oil is sold under long-term contracts.

Currently, the discount for Russian oil has decreased from approximately USD $25 per barrel to about USD $15 per barrel. Incorrys estimates that since the start of the Iranian war, Russian oil prices have increased from around $45 per barrel to approximately $75 per barrel due to the overall increase in global oil prices and the reduced discount.

Additional Revenue for Russia

If the price of Russian oil increases by one dollar, the Russian federal budget receives approximately USD $0.58, with the remaining amount going to oil producers. Russian oil exports are approximately 7 million barrels per day. Therefore, due to higher oil prices, the Russian budget is expected to receive approximately USD $3.7 billion in additional revenue per month.

According to the Russian budget, total annual expenditures are around USD $540 billion (based on an exchange rate of 82 RUB/USD). Therefore, the additional monthly revenue resulting from higher oil prices does not significantly affect the overall Russian budget.

However, oil prices in general—and Russian oil prices in particular—remain highly uncertain. It is also unclear how long elevated oil prices will persist. In the case of a prolonged period of high oil prices, Russia may have an opportunity to significantly reduce its budget deficit, which was estimated at approximately USD $46 billion by the end of 2025.

Russian oil tanker off the coast of Sakhalin

Long-Term Consequences for Russia

In the long term, Russia may significantly benefit from the war in the Middle East. Even if the current conflict is eventually resolved, the risk of future escalation will likely remain. This implies a continued risk of disruptions to oil supply from the Middle East.

As a result, Middle Eastern oil may carry an additional geopolitical risk premium. Consequently, the relative risk of purchasing Russian oil compared with Middle Eastern oil may decline. This could increase the value of Russian oil and further reduce the discount applied to it.

References:

Anand, Saurav. “US waiver opens door for Russian oil to India.”, Financial Express, March 15, 2026, https://www.financialexpress.com/policy/economy/us-waiver-opens-door-for-russian-oil-to-india/4173675/

Mealha, Quirino. “US expands Russian oil waiver to all buyers in bid to tame prices.”, Yahoo!Finance March 13, 2026, https://ca.finance.yahoo.com/news/us-expands-russian-oil-waiver-094259768.html

“Russian Duma passes draft 2026-2028 federal budget in second reading.”, Interfax, Nov 18, 2025, https://interfax.com/newsroom/top-stories/114874/#:~:text=The%20main%20budget%20parameters%20adopted,inflation%20no%20higher%20than%204%25.