Concern prevails in Moscow following developments in Venezuela and American plans to control the country’s oil infrastructure. For decades, crude oil has been a fundamental pillar of the Russian economy, far more than natural gas exports to Europe. Russia appears concerned about falling prices, with analysts estimating that the Latin American country, which holds the world’s largest proven oil reserves, could significantly increase production as early as this year, pressuring international prices and, consequently, Russian revenues, according to the Guardian.
Read: Trump: The US will control Venezuela and exploit its oil – “Time will tell” for how long
Guardian: Why the Russian economy won’t collapse
It’s noted that Russia’s revenues from oil sales in dollars have already been limited by American sanctions on energy giants like Rosneft and Lukoil, combined with the strengthening of the ruble. Those predicting economic collapse argue that after four years of war in Ukraine, the Kremlin is in a vulnerable position and that a sharp drop in oil prices would have catastrophic consequences for funding the war effort.
The reality is more complex. Economic growth, fueled by state military spending, has slowed to almost zero as the government tried to curb inflation. The International Monetary Fund predicts only 1% growth for 2026. Interest rates hover near 20%, taxes are rising, and unemployment has dropped to almost 2% due to serious labor shortages, as thousands of young people are drafted and families emigrate.
Household incomes, which temporarily increased through social benefits, are expected to freeze. According to analysis by economist Marek Dabrowski from think tank Bruegel, recent cuts shift the burden from Moscow to the regions, reducing pensions and limiting education spending. Business circles emphasize that in this environment, investment incentives are limited.
The Iran comparison and the “shadow” fleet
Some compare Russia to Iran, where sanctions and military pressures led to economic suffocation and social unrest. However, analysts point out that the Russian economy has proven more resilient, thanks to its different structure and the state’s ability to tap domestic resources.
In discussions held at the Brookings Institution, ways to strengthen sanctions were examined. Since 2022, Russia has created a “shadow fleet” of hundreds of ships to transport oil to countries like Turkey and India. As its capacity has decreased, full implementation of stricter insurance rules by European financial centers could hurt Moscow’s revenues.
Despite the problems, the Kremlin has managed to restructure its economy, operating it, as analysts say, in a kind of “artificial coma” to limit external pressures. Although reserves are declining and oil revenues have fallen from 50% to 25% of state income, the government covers the gap with increased taxes on citizens and businesses.
Richard Connolly from the Royal United Services Institute notes that the Kremlin has presented the war not as a conflict with Ukraine, but with the West overall. Meanwhile, China remains a key buyer of Russian oil, while other allies cover needs for personnel and equipment.
The Russian economy faces serious pressures and is heading toward long-term stagnation. However, in the short term, even a drop in oil prices would hardly cause collapse. European governments, as analysts point out, should not rely on an economic collapse that isn’t coming, but should continue to support Ukraine militarily and politically while strengthening pressure on Russian trade.
