Of all the parties watching the chaos in the Middle East unfold, one should be rubbing its hands together with particular satisfaction. Russia has not fired a shot in this conflict, lost no allies it cannot afford to lose, and has so far gained rather a lot, with more to come. A cynic might call it the perfect war for Vladimir Putin.
Moscow’s public reaction has been characteristically theatrical. The Foreign Ministry denounced American and Israeli actions as a ‘reckless step’ and a ‘dangerous adventure’. Things have gone no further. There has been no announcement of political or military support for Iran from the Kremlin – nor is there likely to be: Russia needs its drones and missiles for Ukraine. In any case, Iran’s military usefulness to Moscow has already passed: they have already mastered and indigenised Iran’s Shahed drone technology so Tehran is no longer needed as a supplier. Bilateral trade between the two countries amounts to a modest $5 billion (£3.7 billion), mostly agricultural goods that can easily be sourced or sold elsewhere. The loss of Iran as a partner worries the Kremlin very little.
The loss of Iran as a partner worries the Kremlin very little
What the Kremlin does care about is money – and here the Middle East crisis has been unexpectedly generous. Oil prices for Russian crude have climbed from under $40 (£30) a barrel in December to around $72 (£54) in the past week and are rising, first on expectations of war and then as tanker traffic through the Strait of Hormuz ground to a halt. This is already well above the $59 (£44) baseline built into the Russian Finance Ministry’s 2026 budget – a welcome development given that January’s oil and gas revenues fell to a four-year low of 393 billion roubles (£3.7 billion), and the budget deficit hit a record 1.7 trillion roubles (£16 billion). The government had begun quietly discussing spending cuts. Now, at least for the moment, that conversation is less urgent.
At current prices, Russia is earning an additional $3.6 billion (£2.7 billion) per month – nearly $22 billion (£16 billion) over six months, or roughly 0.9 per cent of GDP – compared to December.
The Eurasia Group’s base case – a continuation of disruptions lasting several weeks, followed by a return to pre-war price levels – suggests Russia’s windfall may be temporary. The most dangerous scenario for Moscow is one in which prices spike above $100 (£74), tipping Europe into recession, slowing China and crushing global oil demand. But that would take time to materialise, and in the meantime, Russia will pocket what it can.
For now, Russia is seeing demand for its oil rising, and the usual discount to Brent is shrinking. Russia has already received the green light from America to sell oil to India – one of its biggest buyers alongside China – which had promised to switch to Saudi crude but finds itself constrained by the ongoing conflict. Further sanctions relief may follow if the war drags on. Following an hour-long conversation with Putin, Donald Trump hinted overnight that he may ease some sanctions on Russia ‘until the Strait is up’.
The story with gas is, if anything, more interesting – and not merely financially. The closure of the Strait of Hormuz could disrupt up to a quarter of global monthly LNG supplies. Qatar, which provides roughly 12 per cent of European LNG imports, suspended operations at Ras Laffan, the world’s largest LNG terminal. European gas futures have spiked sharply, raising the spectre of a repeat of the 2022 crisis. This puts the EU’s cherished plan to phase out Russian LNG by 2027 in an awkward position. Belgium, France, the Netherlands, Spain, Hungary and Slovakia together import some 40 billion cubic metres of Russian gas annually – around 15 per cent of total European demand. Even a few weeks of Qatari disruption could be enough to freeze EU plans for a post-April ban on new Russian contracts.
Putin, ever alert to leverage, moved quickly. In remarks last week week, he mused that Russia might find it more profitable to abandon the European gas market entirely and shift to ‘markets that are opening up’. He added, with characteristic disingenuousness, that this was ‘not a decision – thinking out loud’, then immediately instructed the government and energy companies to model the transition. The comments came directly after a meeting with Hungarian foreign minister Péter Szijjártó, who helpfully confirmed that Russian energy remains critically important for Budapest. The choreography was not subtle.
Moscow’s real prize here is political. Rising gas prices strengthen the hand of pro-Russian governments and parties across the continent. They increase pressure on Brussels to soften its stance and make it harder for the EU to move forward with new sanctions packages – work on which has, conveniently, apparently slowed. In the gas market, Russia benefits whether the conflict is short or long: a brief disruption brings immediate financial gains and a sanctions slowdown; a prolonged one may well extend Russian gas contracts and amplify the voices of those European governments most opposed to the ‘Russophobic establishment’, as Kremlin envoy Kirill Dmitriev helpfully characterised it.
There is also a quieter windfall in fertilisers. The Middle East accounts for between 40 and 50 per cent of global nitrogen fertiliser trade, nearly all of it passing through Hormuz. Russia is already a key global supplier of ammonia and nitrogen fertilisers; together with Belarus, it controls some 40 per cent of global potash exports. With Qatari, Iranian and Egyptian production all disrupted simultaneously, Russia faces a sellers’ market. Nigerian and Ghanaian importers are already placing advance orders for the third quarter of the year. Russia is gaining both revenue and goodwill among the countries of the Global South it has spent three years cultivating.
And then there is Ukraine. Washington’s diplomatic attention has drifted; the pressure on Kyiv has eased, but so has the US pressure on Moscow. Air defence missiles are being redirected to the Middle East. A protracted conflict, wearing down both Western arsenals and Western willingness, suits Russia perfectly.
The optimal scenario for Moscow is precisely what it is quietly working to encourage: a conflict of moderate, sustained intensity that keeps energy prices elevated without triggering a global recession. Whether the financial gains are large enough to paper over Russia’s budget crisis – and the political ones sufficient to keep the war in Ukraine grinding on without constraint – depends largely on how quickly, and at what price, order is restored in the Gulf.
For now, Vladimir Putin is watching events he did not start and cannot control – and has clearly concluded that, on balance, things are going rather well.
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