Tag: KSE Institute Report
KSE Institute: Russian Oil Revenues Drop, but Shadow Fleet Cushions the Blow
Russia’s oil export revenues declined by $0.9 billion in August 2025, reaching $13.5 billion, according to the latest Russian Oil Tracker by the KSE Institute. Lower global prices for crude oil and most oil products drove the drop, even though export volumes remained mostly stable. Crude oil revenues fell to $8.8 billion, while oil product revenues slid to $4.8 billion.
The report, authored by researchers from the KSE Institute, highlights how Russia continues to rely on a vast “shadow fleet” to move oil and avoid Western sanctions.
How Sanctions and Shadow Fleets Shape the Oil Market
Since the start of Western sanctions, Russia has developed a massive network of old tankers to transport crude and oil products outside official oversight. Many of those tankers are over 15 years old, which increases the risk of oil spills. In August 2025, 155 of these tankers departed Russian ports, often engaging in ship-to-ship (STS) transfers to obscure cargo origins.
Only 21% of crude and 82% of oil products were shipped using tankers covered by International Group (IG) insurance, showing how much the shadow fleet now dominates Russia’s seaborne oil trade.
India and Turkey Remain Russia’s Top Buyers
India remains the largest importer of Russian seaborne crude oil. Although imports fell 11% month-on-month to 1.5 million barrels per day, India still accounted for 45% of Russia’s total seaborne crude exports. Turkey held its top spot for oil product imports, taking in 425,000 barrels per day.
Key Research Findings
- Russia’s oil export revenues dropped by $0.9 billion in August 2025.
- 155 shadow fleet tankers carried oil and products, with 86% over 15 years old.
- Sanctions enforcement remains weak, allowing more tankers to operate illegally each month.
- Urals crude traded below the G7/EU price cap, while ESPO crude exceeded it.
What’s Next for Russian Oil Revenues?
The KSE Institute projects that Russia’s oil revenues will reach $155 billion in 2025 and $125 billion in 2026 under current sanctions. If Western enforcement weakens further, revenues could climb to $161 billion in 2025 and $146 billion in 2026. However, with stronger price caps and wider discounts on Russian crude, revenues could fall sharply, to as low as $46 billion in 2026. Since the full-scale invasion of Ukraine began, Russia has lost an estimated $159 billion in oil export revenues.
Read the Full Report
Read the full Russian Oil Tracker – September 2025 on the KSE Institute’s website.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Russian Budget Deficit Widens as Growth Stalls and Oil Revenues Fall
Russia’s economy narrowly avoided a technical recession in the second quarter of 2025, but growth remains weak. Inflation eased, yet high interest rates continue to pressure consumers and businesses. Meanwhile, the Russian budget deficit widens as oil revenues decline and government spending rises.
The latest KSE Institute Russia Chartbook (September edition), “Economy Avoids Technical Recession; Budget Targets Revised Once Again,” highlights growing fiscal challenges despite temporary stabilization in output.
Russia Avoids Recession but Faces Persistent Economic Strains
The Russian economy expanded by 0.4% in the second quarter of 2025, following a 0.6% contraction in the first quarter, enough to avoid a technical recession. However, overall momentum remains fragile, with annual growth expected to hover around 1%.
The Central Bank of Russia (CBR) reduced inflation to 8.1% in August, down from around 10% earlier in the year, through tight monetary policy. Yet, borrowing conditions remain difficult as interest rates, cut from 21% to 17%, are still high in real terms.
Persistent issues such as a rising budget deficit, a tight labor market, and sanctions continue to weigh on the outlook. Ongoing Ukrainian attacks on Russian refineries may further raise fuel prices, complicating the balance between price stability and the government’s war-driven fiscal spending.
Russia Budget Deficit Widens Despite Revised Targets
From January to August 2025, Russia’s budget deficit reached 4.2 trillion rubles, slightly better than the 4.8 trillion rubles recorded in January–July. However, oil and gas revenues dropped 20% year over year, while non-oil revenues increased 14%, and expenditures surged 21%.
The government raised its full-year deficit target to 5.7 trillion rubles due to weaker revenues but left spending unchanged. Current trends suggest Russia may exceed this target by year-end.
Looking ahead to 2026, the Russian Ministry of Finance proposes raising and broadening value added tax (VAT) to offset declining oil and gas income. While war-related adjustments are common, the Kremlin aims to stabilize military and security spending, signaling a shift from the sharp increases of recent years.
Key Research Report Findings on Russia’s Budget Deficit
- The federal deficit reached 4.2 trillion rubles in January–August, already 74% of the revised 5.7 trillion rubles target (page 8).
- Oil and gas revenues fell 20% year over year, while spending jumped 21% (page 9).
- Domestic bond (OFZ) issuance hit 3.3 trillion rubles in Jan–Aug, up 104% from a year earlier, with a notably flat yield curve (page 10).
- Liquid assets in the National Welfare Fund (NWF) are down to about 4.0 trillion rubles and could be used up within 6–12 months if trends persist (page 12).
The Broader Economic Backdrop
GDP grew 0.4% quarter-on-quarter in the second quarter of 2025, following athe 0.6% contraction in the first quarter in 2025. Inflation slowed to 8.1% year over year in August, but policy rates remain high, and the ruble weakened again. Labor markets are tight, so spare capacity is limited.
What the Widening Budget Deficit Means
Financing the Russian budget deficit will likely rely more on banks and the shrinking NWF buffer. If oil prices slip further, revenue pressure will rise. Enforcement against the shadow tanker fleet is tightening, which may also weigh on export earnings. Together, these forces point to constrained growth and frequent budget revisions.
Meet the Researchers
- Benjamin Hilgenstock: KSE Institute, Head of Macroeconomic Research and Strategy.
- Yuliia Pavytska: KSE Institute, Manager of the Sanctions Programme.
- Matvii Talalaievskyi: KSE Institute, Analyst.
Read The Full Report
Explore the full findings and detailed analysis by reading the complete report on the KSE Institute’s website. Additionally, you can view more policy briefs from the KSE Institute on the FREE Network’s website.
Explore Other Editions of KSE Institute’s Russia Chartbook
- KSE Institute’s Russia Chartbook – August 2025
- KSE Institute’s Russia Chartbook – July 2025
- KSE Institute’s Russia Chartbook – June 2025
- KSE Institute’s Russia Chartbook – May 2025
- KSE Institute’s Russia Chartbook – April 2025
- KSE Institute’s Russia Chartbook – March 2025
- KSE Institute’s Russia Chartbook – February 2025
- KSE Institute’s Russia Chartbook – January 2025
Record-Breaking Russian Budget Deficit as Oil Revenues Collapse and Economy Stalls
The record-breaking Russian budget deficit has become a central challenge for the country’s economy in 2025. Consequently, falling oil and gas revenues have collided with soaring government spending, pushing the fiscal gap to record levels. Moreover, analysts warn that this trend highlights the increasing strain on Moscow’s financial system and its ability to maintain stability. Therefore, the latest KSE Institute report stresses that these pressures will continue shaping Russia’s economic outlook in the months ahead.
A Record-Breaking Russian Budget Deficit
The Russian budget deficit reached 4.9 trillion rubles in January through July 2025, or 129% of the full-year target (KSE Institute, August 2025). Furthermore, this shortfall is 4.5 times larger than during the same period in 2024 and exceeds all recent records.
The growing Russian budget deficit highlights worsening fiscal stress, fueled by weak oil revenues and expanding government spending. As a result, Brent crude is projected to fall near 60 dollars per barrel by year-end, which will increase fiscal pressure. Consequently, Moscow will likely miss its 3.8 trillion ruble target.
Analysts warn that financing the gap will drain sovereign reserves and require more debt issuance. However, both approaches carry lasting economic risks. In addition, the imbalance raises concerns about economic stability under sanctions and falling global energy prices.
Oil and Gas Revenues Slump Despite Stable Exports
Russia’s oil export volumes remain steady. However, oil and gas revenues fell 19% year-on-year in the first seven months of 2025 (Bank of Russia). Although July saw a temporary boost from quarterly tax payments, this did not reverse the decline. Revenues were still 27% below July 2024.
Export earnings rose to 14.3 billion dollars in July, thanks to a brief oil price rise. Russian export prices averaged 60 dollars per barrel, the G7 price cap. Nevertheless, markets expect weaker global oil prices in late 2025 and early 2026. That trend would deepen the Russian budget deficit.
Debt Issuance Grows as Welfare Fund Shrinks
The Ministry of Finance issued 3.0 trillion rubles in OFZ bonds between January and July, a 114% increase from 2024 (MinFin). Moreover, yields remain low, which shows continued demand from domestic banks.
At the same time, the liquid portion of the National Welfare Fund fell to 4.0 trillion rubles, or 48 billion dollars, in July. The government also sold about 16% of its gold reserves (KSE Institute, August 2025). As a result, analysts caution that liquid NWF reserves could run out within a year. This would leave Russia more vulnerable to its growing budget deficit.
Inflation Moderates but Growth Falters
Inflation slowed to 8.8% in July, down from double-digit levels earlier in 2025 (Central Bank of Russia). Consequently, policymakers cut the key interest rate by 300 basis points to 18%. This marks the beginning of limited monetary easing.
However, the gains come at a cost. GDP growth fell to 1.1% year-on-year in the second quarter, down from 1.4% in the first. On a quarterly basis, growth stalled completely. In addition, severe limits on labor and capital remain. Forecasts from the IMF, OECD, and World Bank predict weaker growth in 2025 and 2026.
A Fragile Outlook for Russia’s Economy
The August 2025 Chartbook shows an economy under serious strain. Oil revenues are weak, expenditures are high, reserves are shrinking, and growth is slow.
With sanctions tightening and global oil prices falling, Moscow may depend heavily on domestic borrowing and possibly money creation. Both options aim to fund military spending and social programs. Ultimately, analysts conclude that the Russian budget deficit is unsustainable and threatens fiscal stability heading into 2026.
Record-Breaking Russian Budget Deficit: Insights, Experts, and Further Resources
Explore Other Editions of KSE Institute’s Russia Chartbook
- KSE Institute’s Russia Chartbook – August 2025
- KSE Institute’s Russia Chartbook – July 2025
- KSE Institute’s Russia Chartbook – June 2025
- KSE Institute’s Russia Chartbook – May 2025
- KSE Institute’s Russia Chartbook – April 2025
- KSE Institute’s Russia Chartbook – March 2025
- KSE Institute’s Russia Chartbook – February 2025
- KSE Institute’s Russia Chartbook – January 2025
Meet the Researchers
- Benjamin Hilgenstock — KSE Institute.
- Yuliia Pavytska — KSE Institute.
- Matvii Talalaievskyi — KSE Institute.
Additional Reading
Explore other policy papers and reports on Ukraine’s economic transition and development on the KSE Institute’s website. Read more policy briefs on Eastern Europe and emerging economies on the FREE Network’s website.
Benjamin Hilgenstock on Trump’s New Sanctions Threat Over Russian Oil
In a recent Radio Free Europe/Radio Liberty article, experts analyzed U.S. President Donald Trump’s call for NATO members to halt imports of Russian crude oil as a condition for Washington to impose tougher sanctions on Moscow. The proposal would primarily impact Turkey, Hungary, and Slovakia, the only NATO countries still purchasing Russian oil.
“Trump’s threats have so far been directed mostly at India and, to some extent, China. Turkey was never really part of that conversation, so this marks an interesting new development,” said Benjamin Hilgenstock, Senior Economist at the KSE Institute.
Turkey’s Crucial Role in Russian Oil Imports
The report underscores that Turkey is now the world’s third-largest importer of Russian crude, benefiting from steep price discounts and profitable refining operations that supply European markets. However, analysts warn that Ankara’s deep energy dependence on Moscow, coupled with its delicate political balancing act between Russia and the United States, could make compliance with Trump’s demands especially challenging.
Hilgenstock noted that cutting off Turkey’s imports would likely force Russia to offer even deeper discounts to attract alternative buyers, further straining its already fragile economy. Still, he emphasized that the political costs for NATO members to take such a step remain significant.
Further Reading
To explore Benjamin Hilgenstock’s full commentary and gain deeper insight into Trump’s evolving sanctions strategy against Russia, read the full article.
Energy exports remain central to Russia’s economy, serving as a key tool of geopolitical leverage. Sanctions on Russia’s energy sector aim to curb state revenues and reduce its influence over dependent nations. Discover the latest data and research on Russia sanctions and energy policy in the Sanctions Portal Evidence Base.
For more expert insights and economic analysis from KSE Institute, visit the KSE Institute homepage.
Russian Oil Revenues Dip to $12.6 Billion as Sanctions Bite
In May 2025, Russian oil export revenues fell by $0.4 billion to $12.6 billion due to lower prices and export volumes. Seaborne oil shipments declined, with oil products dropping sharply. The shadow fleet’s role in exports grew, raising environmental and enforcement concerns. The findings come from the latest Russian Oil Tracker by the KSE Institute, authored by Borys Dodonov, Benjamin Hilgenstock, Anatolii Kravtsev, Yuliia Pavytska, and Nataliia Shapoval.
Falling Oil Exports Amid Sanctions Pressure
Global oil prices remained weak in May, keeping all Russian crude grades within the G7/EU price cap. Export volumes slipped, with overall seaborne shipments down 3.1% month-on-month. Reliance on Western-insured tankers dropped to 42%, while older, uninsured “shadow fleet” tankers carried most crude exports. India remained Russia’s largest crude buyer, taking 51% of shipments, while Turkey led in oil product imports.
Tracking Sanctions Evasion and Enforcement
KSE Institute data shows that 165 Russian-affiliated tankers operated in May without international insurance, 89% of them over 15 years old. Many had previously been sanctioned, yet enforcement gaps persist. Between March and May, 135 sanctioned vessels were still loaded at Russian ports. The US and EU maintain stricter compliance, while UK and Canadian enforcement remains weaker.
Key Research Findings
- Russian oil revenues fell to $12.6 billion in May 2025, the second-lowest since the invasion.
- Oil product exports dropped 7% month-on-month, with Pacific ports seeing a 21.9% collapse.
- Shadow fleet tankers carried 82% of crude exports, most over 15 years old.
- In a strict sanctions scenario, annual revenues could drop to $111 billion in 2025.
Economic and Policy Implications
If sanctions enforcement remains weak, Russia could still earn $163 billion from oil in 2025. Stronger enforcement and tighter price caps could sharply cut revenues, limiting war financing. The growing shadow fleet also raises environmental risks due to poor maintenance and flag evasion. Future monitoring will focus on how sanctions coalitions adapt to these tactics.
Meet the Researchers
- Borys Dodonov: KSE Institute
- Benjamin Hilgenstock: KSE Institute
- Anatolii Kravtsev: KSE Institute
- Yuliia Pavytska: KSE Institute
- Nataliia Shapoval: KSE Institute
Read the Full Report
Explore the complete findings and detailed charts in the Russian Oil Tracker on the KSE Institute’s website.