Vladimir Putin’s Russia isn’t actually safe from Trump’s trade war

Russia got lucky when Trump dropped the “Liberation Day” tariffs. But that luck is fake. The real danger is oil. That one word—oil—is all that holds Putin’s war-fueled economy together. And right now, that oil is dragging his empire straight into hell.

Crude prices are diving. Russia’s Urals blend just sank below $55 a barrel. That’s almost $20 short of what the Kremlin needs to hit its own budget target. Around a third of Russia’s state revenue comes from oil and gas. That hole is a gaping wound. If prices stay down, the country’s deficit could almost double this year.

Trump’s trade moves push Russia closer to collapse

Peace talks over Ukraine are stalling. Moscow is dragging its feet, hoping battlefield wins will force the U.S. to fold. But that leverage is slipping. Oil prices are crushing the Kremlin’s budget. If they fall deeper, Putin might be forced to change his war strategy, because the money simply won’t be there.

J.P. Morgan’s analysts said even though Russia is cut off from most global markets, Trump’s trade policy will still hit it hard. They called it a “tsunami” headed straight for Moscow.

Putin’s government doesn’t just depend on oil for cash. It relies on it for survival. In the 1980s, falling oil prices helped wreck the Soviet Union. In 1999, when Putin became prime minister, rising oil prices bailed him out. His whole power play stands on that foundation. And right now, that foundation is shaking.

The oil industry pumps more than fuel. It lifts other sectors too. When oil does well, steel factories thrive, construction sites boom, and entire towns stay afloat. But when oil drops, everything linked to it drops too. That chain reaction is what economists call a multiplier effect.

Trump’s team knew oil was Russia’s weak spot. His administration hinted early on that they’d pressure U.S. and Saudi production up to drag prices down. Keith Kellogg, Trump’s Ukraine envoy, said in January that if oil fell to $45, it might push Putin to stop the war.

When Trump finally released his new global tariffs list, Russia wasn’t even on it. But that wasn’t a gift. It was irrelevance. The U.S. said there’s barely any real trade left with Moscow thanks to years of sanctions.

Russia faces multi-dimensional pressure

Russia has survived other oil crashes—2008, COVID—but this is different. The war’s been running for three years. The Kremlin tried to hide the costs by handing out jobs and money. If the economy crashes now, that cover gets ripped off.

The Kremlin claims it’s doing “everything to minimize the consequences for the Russian economy.” But the numbers don’t lie.

Brent crude could average just $63 this year, Goldman Sachs said. And by 2026, it could hit $58. Since Urals already sells at a discount, that means Russia’s oil could fall under $50. Coal and metals are also sinking. China’s slowdown from Trump’s tariffs adds more pain.

Renaissance Capital told clients low oil prices could lead to a “hard landing.” They said if Urals stays at $50 this year, Russia’s GDP might only grow 0.1%. That’s nearly flat. Especially bad after the last two years, when military spending boosted GDP by 4% in both 2023 and 2024.

That same spending triggered out-of-control inflation. To fight it, the central bank hiked interest rates to 21%. It’s the highest ever. At the same time, the country’s losing workers—either drafted into the army or fleeing the country.

February’s year-over-year GDP growth was just 0.8%, down from 3% in January. Factory output is down. Car sales are down. Rail cargo shipments are down. Every metric is falling.

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