Russia is heading into 2026 facing renewed pressure on its finances as oil revenues — a key pillar of the state budget — continue to decline. According to Reuters calculations, tax proceeds from crude oil production in January are expected to fall to around 380 billion roubles ($4.7 billion), the lowest monthly level since late 2022. This would represent a 16% drop from December and more than a 50% decline compared with the same period last year.
Lower oil prices have been the main driver of the fall. Russian export blends weakened in December, reducing the mineral extraction tax, which is closely linked to crude prices. At the same time, a stronger rouble has eroded export earnings in local currency terms, while weaker refining margins have further reduced tax income from oil products.
The effective extraction tax rate for December production fell sharply from November and is now back near levels seen after the EU embargo on Russian oil took effect in late 2022. The downturn reflects a broader trend, with Russia’s combined oil and gas revenues nearly halving year on year in December, weighed down by softer prices, a stronger currency, and wider discounts on Urals crude amid ongoing sanctions.
As pressure builds, Moscow has begun debating measures such as tax relief for state energy firms, highlighting the strain on a budget still heavily reliant on oil and gas income. While Russia may be able to absorb the impact in the short term, prolonged low prices and continued sanctions could make early 2026 significantly more challenging for the Kremlin.
Note by Alessandro Bazzoni