Oil and gas revenues will account for less than 20% of Russia's budget this year, Finance Minister Anton Siluanov told the Duma on February 26, as oil prices tumble and sanctions on Russia’s shadow fleet become more effective.

In effect, MinFin is attempting to engineer Russia’s budget spending away from its addiction to hydrocarbon exports and make funding the budget more like that of a “normal” country that is not dependent on its natural resource exports.

Siluanov’s came on the same day as the EU announced plans to ban the import of oil permanently three days after elections in Hungary in April, abandoning the oil price cap sanctions  mechanism completely.

Falling revenues

Oil and gas revenues were down by a quarter in 2025 and are expected to decrease by another 20% this year, making it increasingly hard for the Kremlin to fund its four-year-long war in Ukraine. Last year the Ministry of Finance (MinFin) started with a budget deficit forecast of only 0.5% of GDP, but ended the year with 2.8%.

This year has an equally modest forecast of 1.6%, or RUB3.8 trillion, but economists are expecting oil prices to fall further and say the end of year figure could be closer to 3-4%, depending on the course of the war.

Faced with falling oil and gas revenues, which used to make up 40-50% of the government’s income pre-war, Russian Finance Minister Anton Siluanov is getting ready for a world where Russia is less reliant on oil and gas exports for income. The contribution of VAT receipts to revenues have already risen to around 40%, overtaking oil and gas as the most important tax for the budget, and that will only increase after the rate was hiked 2pp to 22% as of the start of this year.

Now the Finance Minister said the government is considering tightening the budget plan further by lowering the oil cutoff price that automatically sends surplus funds to the National Welfare Fund (NWF), Russia’s rainy-day budget reserve.

"The Russian government is considering tightening the budget rule in terms of lowering the base price. I believe we will review and adopt such decisions fairly quickly," Siluanov told the Russian deputies.

At the same time, budget indicators will still be adjusted based on the current economic situation, and National Projects 2.2 programme of social investments will be funded. "Perhaps, given the external environment, the indicators will be slightly shifted or modified," Siluanov noted.

The Ministry emphasized that the high deficit at the beginning of this year was again caused by MinFin bringing forward many payments to try and avoid the end of year spike in December where typically 20% of all spending is done.

A tighter budget rule in a move that would divert a larger share of oil windfall revenues into the National Welfare Fund (NWF) and limit spending on current budget needs.

The current cut-off price is set at $59 per barrel for Urals crude and is scheduled to fall by $1 per year until it reaches $55 in 2030, as MinFin adjusts plans to move Russia away from its oil and gas addiction. However, in January the average Urals price was just $54.2, below the benchmark.

Siluanov said a final decision could be taken within weeks “to ensure the NWF’s resources are preserved, thereby reducing pressure on the foreign exchange market”.

MinFin has been tapping the NWF to cover the budget deficits over the last three years, which has fallen from RUB8.78 trillion on February 1, 2022, in its liquid part to RUB4.23 trillion ($50bn) now – enough to cover the forecast budget deficit completely, but for the last time. MinFin has avoided depleting the NWF completely and has used a mix of funding mechanisms to preserve some funds for emergencies.

The new tighter rule would effectively lower the oil price cut-off used in the budget rule, increasing the share of excess oil revenues saved rather than spent to start building the fund up again.

In January, oil and gas revenues were down sharply, falling by roughly half year on year. Under Russia’s fiscal framework, the key variable is the cut-off price of oil: the lower the benchmark, the more revenue is siphoned into the sovereign fund when actual prices exceed it.

January’s federal budget deficit reached RUB1.72 trillion, or 0.7% of GDP, compared with the planned full-year deficit of RUB3.79 trillion. With external financing largely unavailable due to sanctions, the government intends to fund most of the gap through domestic borrowing, despite elevated interest costs, which are starting to cut into expenditures.

Analysts at Raiffeisenbank have warned that current oil prices are too low for the deficit to remain within target by year-end. According to Tverdye Digits, a $1 reduction in the oil cut-off price equates to a 0.05–0.06% reduction in budget expenditures, The Bell reports.

The tightening of the fiscal rule also has currency implications. When oil prices fall below the cut-off, the central bank must sell yuan from the NWF in exchange for rubles, a mechanism that can support the currency. However, the authorities are wary of excessive ruble strength — currently trading just above RUB76 to the dollar — as it erodes budget revenues denominated in foreign currency. Following reports of the proposed cut-off adjustment, the ruble weakened by 2% against the yuan.

The fiscal recalibration signals mounting strain within Russia’s public finances. Russia’s economy is not going to collapse, but it is increasingly stressed. In January, CBR governor Elvia Nabiullina warned of a recession this year, or even stagnation, due to her unorthodox experiment to artificially slow economic growth to pull inflation rates down.

While military spending remains elevated, other areas of expenditure are likely to face cuts. Economists have cautioned that further tightening could increase pressure for new taxes, raising concerns over what one Moscow-based macroeconomist described last year as a potential “tax spiral” in which successive levies are introduced to offset weak revenue collection.

As energy prices fluctuate and borrowing costs rise, the balance between preserving reserves and sustaining wartime spending is becoming ever more delicate.

Oil import ban

The change to the budget rule is in response to the EU’s growing resolve to hit Russia’s oil business. The European Commission is preparing legislation to permanently ban Russian oil imports by the end of 2027, in a move that will follow Hungary’s parliamentary elections by just three days, according to EU officials and a document seen by Reuters. The oil ban comes on top of another ban Russia gas imports completely at the start of 2027.

The proposal is due to be submitted on April 15, shortly after Hungarian prime minister Viktor Orbán faces voters on April 12. Orban has been a Kremlin-ally and Hungary continues to import significant amounts of cheap Russian oil and gas.

Two EU officials confirmed to Euromaidan Press the timing was deliberate, designed to keep the issue out of Orbán’s campaign while giving any successor government room to align with the measure. Orban is currently trailing in the polls by ten points behind challenger Peter Magyar.

The Commission had already committed to phasing out Russian oil when the European Parliament approved a Russian gas phase-out in December 2025. An October committee vote had pushed for a full oil cutoff. What is new is the formal timetable — and the political calculation behind it.

The legal mechanism mirrors that used for the Russian gas ban adopted on January 26, which passed by a qualified majority of 24 to two, with only Hungary and Slovakia voting against, Euromaidan Press reports.

By proceeding under the REPowerEU framework, the Commission can rely on qualified majority voting rather than unanimity, meaning neither Budapest nor Bratislava would be able to veto the measure. Any legal challenges would proceed after the regulation enters into force.

Hungary and Slovakia have already vowed to challenge the gas ban in court and are expected to do the same if oil is included. However, litigation would not suspend implementation.

The EU has already sharply reduced its reliance on Russian crude, but remains heavily dependent on imports. Embarrassingly, in January 2026, France was the biggest buyer of Russia fossil fuels in the EU. France imported €315mn of Russian fossil fuels, all in the form of LNG. France’s LNG imports from Russia saw a massive 57% month-on-month increase as the EU races to keep its gas storage tanks full during this winter’s big freeze, while total monthly import volumes saw a much more modest 15% increase.

Hungary was the EU’s second-largest importer, purchasing €199mn worth of Russian fossil fuels. This included 144mn of pipeline gas and €55mn of crude oil.

By the final quarter of 2025, Russian oil accounted for just 1% of total EU imports, down from 27% before Moscow’s full-scale invasion of Ukraine. Hungary, however, has moved in the opposite direction, increasing its dependence from 61% before the war to 92% in 2025, according to data compiled from Eurostat and the International Energy Agency.

Budapest has relied heavily on a temporary derogation allowing continued imports via the Druzhba pipeline. But Hungary’s own refiner, MOL, acknowledged in November that it could meet around 80% of its supply needs through Croatia’s Adriatic pipeline. Bulgaria, which also received an exemption, ended Russian crude imports voluntarily on March 1, 2024 without a spike in prices, switching to alternative supplies.

The oil ban would be embedded in the new EU legislation, making it more durable even in the event of a future peace agreement and the easing of broader sanctions, Euromaidan Press reports. The move comes amid tensions over the Druzhba pipeline, which has been disrupted by Russian strikes. Ukrainian President Volodymyr Zelenskyy recently refused to authorise repairs, citing the risks to workers’ lives. That provoked a threat by Budapest and Bratislava to cut off emergency power supplies to Ukraine in retaliation in the midst of a freezing winter.

Orban has positioned himself as a defender of Hungary’s energy security and has resisted broader EU support measures for Ukraine, including a proposed €90bn EU loan. But with the EU’s reliance on Russian oil now marginal, Brussels appears ready to complete the decoupling process — and to do so on a timetable calibrated as much by politics as by energy markets.