**Oil Prices Plummet, Threatening Russia’s War Funding**
Oil prices have been on a downward trend for the past few weeks, and it seems they are not going to bounce back anytime soon. According to Reuters, oil prices are heading for their biggest monthly decline since November 2021. This collapse in energy revenues comes at a critical moment for Russia, which relies heavily on oil sales to fund its war against Ukraine.
For Moscow, the price drop is particularly worrying as it threatens to squeeze its war budget. While Western sanctions haven’t hampered Russia’s ability to sell its energy resources, falling prices might now hinder its ability to finance its military campaign in Ukraine. The Kremlin had planned its 2025 budget based on oil prices of $70 per barrel, but with Brent crude dropping to $63.48 per barrel and U.S. West Texas Intermediate crude at $59.68, it’s clear that Moscow’s revenue projections are no longer valid.
**Trade War Concerns Contribute to Oil Price Decline**
The decline in oil prices started in early April when US President Donald Trump announced new tariffs on imports. China responded with its own tariffs, sparking a trade war between the world’s biggest oil consumers. This escalation of tensions has led to concerns about oversupply in global markets, which in turn has pushed oil prices down.
Recent data shows that major economies are facing economic troubles. The US economy contracted in the first quarter, and Chinese manufacturing activity fell at its fastest rate in 16 months. These economic woes have contributed to a decrease in demand for oil, leading to a surplus of crude on global markets.
**Russia’s Oil Revenues Take a Hit**
The Russian Finance Ministry has reported that oil and gas revenue already fell by 17% year-on-year in March to 1.08 trillion rubles ($12.8 billion). This drop resulted in a loss of approximately 230 billion rubles ($2.7 billion) in tax income compared to March 2024. Kremlin spokesperson Dmitry Peskov has admitted that Russia is “closely monitoring” oil markets, given the significance of oil revenues for its war budget.
As oil prices continue their downward trend, it’s clear that Russia faces a significant challenge in financing its military campaign in Ukraine. The impact on Moscow’s economy and war efforts will be closely watched by analysts and policymakers alike.
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