Higher oil prices are making Russia richer — but not economy

Higher oil – Sanctions-hit Russia is drawing in more money as Brent crude rises, but Goldman Sachs says the economy has little spare capacity to turn that oil windfall into faster, demand-driven growth—leaving policymakers facing tighter constraints and inflation risks ins

On late Tuesday. Brent crude futures hovered around $92 a barrel—an oil-price level that has quietly shifted Russia’s finances even as its wider economy struggles to gain traction. For Russia. the payoff is real: higher energy revenues are bringing in more cash at a moment when sanctions and war-related pressures are still weighing on growth.

The jump is sharp. Brent futures were about 30% higher since the Iran war started, according to the figures cited in a Goldman Sachs note. With Russia the world’s third-largest oil producer and exporter after the US and Saudi Arabia, that rise is acting like a financial cushion.

There’s a twist in why the windfall has been so valuable to Moscow. Unlike many other oil exporters, Russia does not rely on the Strait of Hormuz for shipments. That detail has helped Russia stand out as one of the few beneficiaries of recent disruptions to global oil markets.

But more money does not automatically translate into a faster economy. Clemens Grafe. an economist at Goldman Sachs. wrote in a Tuesday note that Russia’s economy “has little room to expand. ” limiting how much the oil windfall can be converted into faster growth. “Despite the weak growth and funding being available to boost the economy. we do not forecast a demand-driven acceleration. ” Grafe wrote.

Goldman’s forecast points to a slowdown rather than a breakout. The bank expects Russia’s economy to grow 0.9% this year. That would be slower than the 1% and 4.3% growth recorded in 2024 and 2025, respectively.

Even so, the size of the oil-driven gains is substantial. Goldman estimates Russia’s current-account surplus—a measure of trade and income flows with the rest of the world—will nearly double to 3.2% of GDP in 2026 from 1.7% in 2025. The budget is also benefiting. Grafe estimated that every $10 increase in Russia’s oil export price adds roughly $21 billion in budget revenue.

Yet the extra cash meets limits inside the economy. “There is no meaningful spare capacity in Russia,” Grafe wrote. The labor market remains extremely tight, with unemployment near record lows. Productivity growth has weakened. and Grafe estimates that 2 million workers are no longer available because of military service. casualties. or emigration amid the war in Ukraine.

With that kind of constraint, pumping additional funding into the economy is unlikely to produce significantly more goods and services. Grafe’s note suggests Russian policymakers are more likely to treat the oil windfall as an inflation risk than a growth opportunity. “Higher energy prices will not remove the binding constraints on growth,” he wrote.

The contrast is hard to miss: revenue can rise quickly, while output struggles to follow. In April. Russian President Vladimir Putin rebuked top officials following the country’s economic contraction earlier this year. demanding proposals for “additional measures aimed at ​reviving ⁠growth.” Earlier. in January. Putin ordered a “significant increase” this year in tax collection and compliance as the economy came to a standstill.

Those directives land in a tightening economy where demand can’t easily expand and supply can’t easily catch up. In that setting. the oil boom looks less like a springboard for growth and more like a pressure test for stability—one that is enriching Russia’s balance sheets while leaving the broader economy stuck behind constraints Goldman is warning about.

Russia oil prices Brent crude Goldman Sachs Clemens Grafe sanctions-hit Russia current-account surplus unemployment near record lows Putin economic measures inflation risk oil export revenue