Russian President Vladimir Putin hasn’t been shy about gloating over the upside of the Iran conflict for Russia, as oil prices surge and the U.S. reevaluates its punitive measures on Russian crude.
When the Kremlin leader sat down with the heads of Russia’s top oil-and-gas companies late Monday, he took the opportunity to taunt European countries that have spent the last four years weaning their economies off Russian energy supplies over Moscow’s invasion of Ukraine.
With a heavy dose of schadenfreude, Putin said he wanted a clear signal from Europe if it wanted to return to Russian gas, which is cheaper than liquefied natural gas from the U.S. or the Persian Gulf.
“If the European companies, European buyers suddenly decide to reorient themselves and guarantee us consistent and long-term cooperation, bereft of political overtones—please. We never refused, we’re ready to work with Europeans,“ he said.
Oil is the lifeblood of the Russian economy. The steady decline of prices and the needs of the military at the front in Ukraine had been eating away at Russia’s finances and undermining its economic prospects, with annual growth expected at 1% or less in coming years.
The surge in prices has—at least temporarily—given Russia’s economy a new lease on life.
Russian Urals, which sold at just above $50 per barrel for most of last year, skyrocketed to above $100 earlier this week. On an annual basis, the Russian economy gains around 0.7% for every $10 the oil price moves. Currently, Russia can balance its budget with a price of $59 per barrel.
“It gives them a bit of a respite, but not enough to go and open new fronts” either in the Ukraine war or in their hybrid conflict with the West, said Elina Ribakova, senior fellow at the Peterson Institute for International Economics. “I would worry that if it were to hold for half a year that Russia would gain more appetite to do so.”
With midterm elections looming this year, the increased pain in oil markets has prompted the Trump administration to roll back some of its efforts to put pressure on Russia’s economy—by allowing Indian refineries to purchase Russian oil for a month. Treasury Secretary Scott Bessent has held out the possibility of easing Russian sanctions further to stabilize crude prices and prevent further pain at the gas pump.
“Russia has warned many times, I’d like to note, that attempts to destabilize the situation in the Middle East will unavoidably strike the global fuel-energy complex, raise prices on oil and gas, limit deliveries of these resources around the world,” Putin told the meeting of oil-and-gas executives Monday. “Judging by everything, that’s exactly what’s happening.”
Moscow has been backing Iran, its closest partner in the Middle East, in the war. Russian officials have condemned the U.S. and Israeli strikes. Moscow has been secretly sharing the location of U.S. forces in the Middle East with Iran, The Wall Street Journal has reported.
President Trump and Putin spoke by phone Monday. White House special envoy Steve Witkoff said the Russians told Trump that they hadn’t shared intel with Iran. “We can take them at their word,” Witkoff said in an interview Tuesday with CNBC.
Kremlin foreign-policy adviser Yuri Ushakov said the two leaders spoke about the Iran conflict and Venezuela, and Putin shared his views on solving the crisis in the Middle East.
A short time after the call, Trump said the war would be over “very soon” and that sanctions on some oil-producing countries could be removed. Oil prices dipped on Trump’s comments.
European countries have pivoted to oil from Norway and the U.S. after putting sanctions and a price cap on Russian crude. They also ended natural-gas contracts with Moscow. Next month, the European Union is expected to introduce a series of measures to further limit the purchase of Russian hydrocarbons.
The conflict has already caused energy prices to surge on the continent. The G-7 group of developed nations met on Monday as the price of oil briefly rose above $120 a barrel, though the group decided not to release oil reserves to help bring down prices yet.
During his Monday meeting with oil executives, Putin took a moment to praise Hungary and Slovakia, two notable exceptions within the EU which continue to import Russian fossil fuels, often undermining EU initiatives on Ukraine. Both the countries are currently locked in a dispute with Ukraine over the delay of oil deliveries after a Russian drone struck the pipeline over Ukrainian territory.
In the meeting, Putin urged prudence. He said policymakers should remember that price increases were likely temporary. He said oil companies should first and foremost use the injection of cash to pay off debts to Russia’s state-owned banks. That would give its biggest banks a chance to either buy more domestic debt and help close a budget deficit or boost lending to the country’s defense sector.
Rising oil prices don’t mean Russia’s problems are over, said Petras Katinas, research fellow in climate, energy and defense at the Royal United Services Institute, adding that sanctions force Russia to rely on a limited number of vessels—its so-called shadow fleet—for its exports.
“Even now, Russia doesn’t have enough shadow fleet tankers to move all of its current crude exports, they’re facing a bottleneck, too,” he said.
Write to Thomas Grove at thomas.grove@wsj.com