Falling oil prices undermine Russia’s war financing
Halla Hrund Logadóttir says it is noteworthy that no tariffs have been imposed on Russia in the US actions. Composite image
Crude oil prices have dropped to their lowest levels since 2021, during the peak of the COVID-19 pandemic. According to Halla Hrund Logadóttir, Member of Parliament for the Progressive Party and former Director of Energy Affairs at Orkustofnun, this drop could significantly impact Russia’s ability to finance its war in Ukraine, as the country remains heavily dependent on energy exports.
The price of oil has fallen by 22% following the announcement of global tariffs by former U.S. President Donald Trump. Although some of these tariffs have since been withdrawn, market uncertainty remains, and oil prices have shown little sign of recovery.
No U.S. tariffs on Russia
Logadóttir points out that Russia was exempt from U.S. tariffs, a move she says may be tied to potential diplomatic negotiations surrounding the Ukraine conflict—though she emphasizes that this is purely speculative.
“Russia’s energy sales are crucial to its economy, making up between 35% and 50% of state revenues,” Logadóttir explains. “If oil prices continue to fall, it becomes increasingly difficult for Russia to sustain expensive military operations. This could have an effect on the situation in Ukraine, though the markets are extremely volatile.”
Record gas sales to Europe
Despite Europe’s efforts to reduce dependency on Russian oil following the invasion of Ukraine, Russia has managed to maintain—and even increase—gas exports to Europe.
“Last year was actually a record year for Russian natural gas sales to the European Union,” says Logadóttir. “That’s because no trade sanctions have been placed on Russian liquefied natural gas (LNG). Calls for a ban on gas imports have grown, given their role in funding the war effort, but European leaders have been reluctant to act, largely due to concerns over gas prices and winter heating needs.”
She notes that this reluctance is a strategic decision, reflecting the delicate balance European countries must strike between punishing Russia economically and maintaining stable energy prices for their citizens.
As oil prices continue to fluctuate, the financial pressure on Russia may mount. How this will influence the broader conflict in Ukraine—and whether Europe will shift its stance on natural gas—remains to be seen.
