Putin is making the most of the US-Iran war as energy shock fills his coffers

The US decision to temporarily lift some restrictions on Russian oil has delivered a geopolitical victory to the Kremlin on top of the boon that Russia’s war-strained budget is already receiving from soaring energy prices.

The US move, announced on Thursday, is intended to ease an energy shock that has accompanied the US-Israeli attacks on Iran and at times sent the price of oil soaring over $US100 a barrel.

Analysts said they did not believe the suspension of sanctions on Russian oil already on tankers at sea would substantially ease the worst supply shock to the global market since the 1970s, given that Russia had been able to transport and sell its oil for years despite the restrictions.

“Right now, obviously, the world needs every extra barrel that is available, and I can understand why the White House, under political pressure, would want to check this particular box,” said Pavel Molchanov, an energy analyst at Raymond James. “But it’s not going to make any meaningful difference.”

European countries, which have been at the forefront of imposing sanctions on Russia and are also suffering from higher energy prices, opposed the US move.

Paula Pinho, a spokesperson for the executive arm of the European Union, said that walking back Russian sanctions in response to an admittedly challenging energy situation would be “a total strategic blunder.” President Volodymyr Zelensky of Ukraine said during a news conference Friday that the move “certainly does not help peace.”

The temporary loosening of the US restrictions, some analysts said, could reduce the discount that Russia has been forced to offer buyers of its oil since the invasion of Ukraine four years ago and lower logistics costs for Russian oil suppliers. Still, the real boon for Russia, they noted, is from higher prices, which the conflict in Iran was prompting before the United States loosened restrictions.

Russian oil has gone from global pariah to now being extremely sought after, with the discount on Urals crude versus the global Brent benchmark almost disappearing.

The mood in Moscow was triumphant, after years in which the United States and European countries have tried to starve Russia’s economy of the energy revenues needed for its war machine. Russian officials said the US move showed that Russia could not be dislodged from its central place in global energy markets.

Kirill Dmitriev, President Vladimir Putin’s special envoy for foreign investment and economic co-operation, boasted in a post on Telegram that the United States was “effectively acknowledging the obvious: without Russian oil, the global energy market cannot remain stable.”

In a post on social media, Dmitriev was even more blunt: “EU bureaucrats will soon be forced to recognise this reality, acknowledge their strategic blunders, and atone.”

Dmitriev met this week in Florida with Steve Witkoff, President Donald Trump’s special envoy, and Jared Kushner, the president’s son-in-law. They discussed energy issues in addition to the peace negotiations that Witkoff and Kushner have been leading.

The Kremlin spokesperson, Dmitry Peskov, told journalists on Friday that the interests of the United States and Russia had aligned in the current environment and welcomed the US move.

“Such measures will help stabilise the market,” Peskov said. “Without significant volumes of Russian oil, market stabilisation is impossible.”

The decision came as the Trump administration scrambled to contain the energy shock that has resulted from production disruptions in Gulf countries and the de facto closure of the Strait of Hormuz, a key transit corridor for oil and gas.

The US move was announced by the Treasury Department, which said the exemptions would be in place until April 11 and apply only to Russian oil that was loaded onto tankers on or before Thursday.

The Trump administration has argued that its move does not directly benefit the Russian budget because Moscow taxes oil based on production, meaning the oil at sea subject to the exemption has already been taxed.

Washington previously issued a 30-day waiver to allow India to buy Russian oil, an about-face after the Trump administration pressured New Delhi to cease purchases last year. Indian firms moved rapidly to buy the Russian oil available on the market. David Wech, chief economist at the oil and gas cargo tracking firm Vortexa, said he expected Indian imports of Russian crude to “reach new record highs” from next month, providing the situation in the Middle East continued.

Since Putin launched his full-scale invasion of Ukraine four years ago, China, Turkey and India have been among Russia’s biggest oil purchasers.

Soaring energy prices and sanctions relief during the conflict with Iran have offered the Kremlin a lifeline at a difficult financial moment.

On Tuesday, the Russian finance ministry reported that its revenues had collapsed by more than 10 per cent since the start of the year, with its budget deficit reaching $US43 billion, more than 90 per cent of what was forecast for all of 2026.

Now, prices have risen and restrictions have vanished on the barrels of its oil currently at sea. There were about 137 million barrels of Russian crude on the water as of Thursday, Wech said, citing Vortexa tracking data. In a commentary, he said that Russian oil was “selling and being delivered like hot cakes” in response to the disruption in the Strait of Hormuz.

“Russian oil has gone from global pariah to now being extremely sought after, with the discount on Urals crude versus the global Brent benchmark almost disappearing,” Robin Brooks, a senior fellow at the Brookings Institution, wrote in a post on Substack. Urals crude is the blend most often produced by Russia.

Russia’s budget is set to gain more than $US1.6 billion per month from each $US10 increase in the price of its crude, according to Sergey Vakulenko, a senior fellow at the Carnegie Russia Eurasia Center in Berlin and a former top manager at Gazprom Neft, one of Russia’s largest oil producers.

As of Friday, Russia’s Urals oil benchmark had increased by about $US30 per barrel since before the war with Iran, according to Argus Media, a price reporting agency used by the Russian government to calculate its oil extraction taxes. That would mean that the country is receiving more than $150 million extra every day.

The European Union has rejected easing sanctions on Russia in response to the energy crisis.

President Emmanuel Macron of France, speaking at a joint news conference Friday with Zelensky in Paris, said that if Russia believed the war in Iran would give it a respite, “it is mistaken.” He said France’s support for Ukraine would not weaken.

Chancellor Friedrich Merz of Germany expressed a similar sentiment Friday in Norway.

“Let me be very clear: We believe it would be wrong to ease sanctions now, for whatever reason,” Merz said during a news conference.

“We will continue our support for Ukraine. We will not allow ourselves to be deterred or distracted by the war in Iran.”

The oil crunch in the Middle East has the potential to do more than prop up the Russian budget, more than a third of which is being spent on the war in Ukraine. It could also shift the Kremlin’s leverage in the global market, with countries in Asia beginning to view Moscow as a more necessary long-term partner.

For years, China has been reluctant to pursue Moscow’s ambitious plans for a gas pipeline and other projects. But it may now be more amenable, looking to diversify its supplies away from the Middle East in the longer term.