MOSCOW, July 10 — In the corridors of global energy markets, a new spectre is taking shape: the prospect of sweeping tariffs on Russian oil exports, a measure that could fundamentally alter the financial architecture of the Kremlin’s war machine. Against this backdrop, the numbers under discussion are stark. According to analyses circulating among international economists, the proposed tariffs could slash Russia’s annual oil export revenue by an estimated $50 to $90 billion.
This would represent a 30 to 50 percent reduction from the current level of roughly $180 billion. For a federal budget that relies on oil and gas revenues for about 30 percent of its total income — which stood at $340 billion in 2024 — a $50 billion shortfall would amount to a 5 percent cut in overall budget revenue.
The wider picture is one of forced trade-offs. Russia’s military spending in 2024 was $109 billion, roughly 6 percent of its GDP. A loss of this magnitude would almost certainly compel cuts to that expenditure, or to other state programmes that have already been squeezed by Western sanctions.
The Kremlin has, in recent years, shown a willingness to prioritise defence and security over social spending, but the arithmetic of a $50 billion hole is unforgiving. For European capitals, the calculus is different, but no less fraught.
The European Union has already dramatically reduced its reliance on Russian energy since the invasion of Ukraine in 2022, but the continent remains exposed to global price spikes. The proposed tariffs, by restricting supply from one of the world’s largest producers, would almost certainly push crude oil prices higher on international markets. The United States, however, occupies a distinct position.
US imports of Russian crude fell to zero after the 2022 ban, meaning the direct exposure is minimal. For American consumers, the indirect effect could still be felt at the pump. Based on the historical relationship between crude oil prices and retail gasoline, higher global prices could increase US gasoline costs by $0.20 to $0.50 per gallon.
That may sound modest, but the scale is enormous: US gasoline consumption was approximately 370 million gallons per day in 2024. At a $0.30 increase, that would cost consumers an additional $111 million per day, or roughly $40 billion annually.
What is at stake for the US economy is a matter of debate. The Peterson Institute for International Economics has estimated that if oil prices rise significantly, the net effect could be a reduction in US GDP of 0.1 to 0.2 percent. That is not catastrophic, but it is not trivial either, particularly for an administration that has made domestic energy production a centrepiece of its economic platform.
A potential boost for US producers
Yet there is another side to this ledger. The Energy Information Administration (EIA) has projected that US oil output could rise by 500,000 barrels per day in response to higher prices. That would be a meaningful increase for American producers, who have already pushed domestic production to record levels in recent years.
Higher prices, in theory, incentivise more drilling, more investment, and more jobs in states like Texas, North Dakota, and New Mexico. The net effect on the US economy is uncertain, caught between the drag of higher gasoline costs for consumers and the stimulus of expanded domestic production.
The Peterson Institute’s estimate of a 0.1 to 0.2 percent GDP reduction suggests that, on balance, the costs may outweigh the benefits. But the distribution of those costs and benefits matters politically: higher pump prices are felt immediately by millions of voters, while the gains from increased oil production are concentrated in specific regions and industries. For the European Union, the equation is more straightforwardly painful.
Europe has spent the past four years diversifying its energy sources, building liquefied natural gas terminals, and signing long-term contracts with suppliers in the Middle East, Africa, and the Americas. But the continent remains a price-taker in global oil markets, and any sustained increase in crude prices would feed directly into inflation, industrial costs, and household budgets.
The tariffs, if implemented, would also test the unity of the Western alliance. The US has led the charge on sanctions against Russia since 2022, but each new round of restrictions has required delicate negotiations with European partners who bear a disproportionate share of the economic pain. A tariff regime that raises global oil prices would hit Europe harder than the United States, potentially reigniting tensions that have been papered over since the early days of the war.
The Kremlin’s narrowing options
For Moscow, the arithmetic is grim. Russia’s federal budget has already been stretched by the costs of the war in Ukraine, by the loss of European gas markets, and by the technological isolation imposed by Western sanctions. Oil export revenue has been the single most important pillar propping up the economy, and a $50 to $90 billion reduction would represent a blow from which recovery would be difficult.
The Kremlin has some tools at its disposal. It could attempt to redirect more oil to China and India, which have become the primary buyers of Russian crude since the 2022 invasion.
But those markets are already saturated, and the discounts Russia has been forced to offer to Asian buyers have already cut into its profit margins. Further tariffs would only deepen those discounts, as Russian oil would become even less competitive on the global market.
