Russian crude oil prices collapsed to their lowest levels since the COVID-19 pandemic this week, intensifying fiscal pressures on the Kremlin as it grapples with a widening budget deficit and mounting banking sector stress.
Urals crude, Russia’s flagship export grade, traded at $34.82 per barrel in Baltic Sea ports and $33.17 in Black Sea terminals on Friday, according to Bloomberg citing Argus Media data. The steep decline signals the impact of US sanctions imposed on major Russian oil producers Rosneft and Lukoil in October.
Federal oil and gas revenues dropped 34% year-over-year in November, The Moscow Times reported, citing Finance Ministry data. The ministry initially drafted the 2025 budget assuming oil prices of $69 per barrel.
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Russia’s federal deficit reached 4.3 trillion rubles ($47.6 billion) in the first 11 months of 2025, according to government data. Moscow issued over 2.8 trillion rubles in federal bonds this year, with borrowing costs rising from 10.6% to 11.8%.
The banking sector shows mounting strain. Credit Bank of Moscow reported an eightfold surge in overdue debt since January, with non-performing loans reaching 28% of its loan book. Problem loans across the entire banking sector reached 10.4 trillion rubles by the end of the third quarter.
A Kremlin-aligned think tank warned that Russia could face a systemic banking crisis by October 2026 if problem assets exceed 10% and depositors begin mass withdrawals.
The civilian economy contracted in most sectors during 2025. Food production fell 0.2%, textile and footwear output dropped 2.3%, and furniture manufacturing declined nearly 10% in the third quarter. Russia’s economy expanded just 1% in the first nine months of 2025, down from 4.3% growth in the same period last year.
The Central Bank cut its benchmark interest rate to 16% on December 19, down from a peak of 21% reached in September 2024. Defense and security spending accounts for approximately 40% of federal expenditures in 2025, exceeding 8% of GDP.
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