Excuse my French

Timothy Ash

Timothy Ash is a London-based senior emerging markets sovereign strategist for Bluebay Asset Management Company.

He has written 167 articles for the

TIMOTHY ASH

JUL 01, 2026

Gallup released an interesting poll this week (see below) which suggested Russians’ confidence in the outlook for the economy is at its lowest point for 20 years.

https://news.gallup.com/poll/711989/russian-economic-outlook-negative-years.aspx

Note that the above was also before the Ukrainians rolled out their own recent sanctions initiative, hitting Russian fuel supplies and causing an increasingly bad domestic fuel shortage, and particularly around Crimea. That is only going to get worse, much worse.

After 4.5 years of a war, or “special military operation” which was meant to be over in weeks, the war seems to be finally coming home to Russians.

And all this is only going to get worse for a number of reasons:

First, while the Iran war provided some short term relief for Russia with higher oil prices and with the temporary lifting of sanctions on Rosneft and Lukoil, with the conflict in the Gulf drawing to a close the U.S. failed to extend the licenses of the two Russian oil companies to temporarily sell oil on global markets. The expectations now is that the Urals oil price discount will return to its pre-Iran war level of around 30% to Brent/WTI. And with Brent and WTI dropping to around the $70 a barrel level, that would suggest that Urals will be back to trading with a 50 handle.

Second, longer term oil price trends are likely to be unfavourable to Russia. The Iran war is likely to have seen global demand destruction, at the same time as it has weakened OPEC with UAE opting to leave. UAE has made clear that with its own development priorities, and now a need to raise more funds for investment in security and trade diversification, it wants to pump much more oil. Other oil producers are likely to follow and this would suggest weaker demand and more supply leading to lower oil prices, perhaps from levels before the Iran war. A year out from now oil prices could be at $60 a barrel, or lower, and with that 30% discount for Urals this could suggest oil below even the $46 a barrel level seen in early 2026.

Third, the resilience of global energy markets to the Iran war shock, and the loss of 14-15 million barrels a day of oil supply thru the Straits might suggest that the West will be more willing to tighten energy sanctions on Russia to try and bring an early end to the war in Ukraine. Remember here that the West has tended to pull its punches on imposing aggressive sanctions on Russian energy for fear of disruption to global markets. But if global energy markets rode through the loss of 14-15 mbd in Gulf oil, then surely it will be more than able to cope with the potential loss of Russian oil exports which amount to around 4 mbd. The Iran war has shown that the West has much more leverage over Russia than it has perhaps dared to assume. Sanctions should be tightened. The total loss of those exports would cost the Russian economy at least €500m a day in revenues which would be catastrophic for the Russian budget, balance of payments, economy and Putin’s war machine. If the West, and even China, wants to bring this war to an end they should cut off Russian energy exports.

Note that with Urals oil at around $46 a barrel in Q1 2026, the Russian budget was running a deficit of 2.6% of GDP, and the economy was already in recession. Completely blocking those oil exports would see the budget deficit spiral to multiples of the planned amount, the economy would collapse into a deep recession and likely the banking sector would come under extreme pressure, as would the rouble as capital flight will accelerate. The wheels would literally come off Putin’s war machine.

Fourth, with the €90 billion EU loan for Ukraine agreed at the EU council meeting in December, and with another €100 billion in pre accession funds in the offing, Ukraine’s war machine is now well financed for many years to come. Ukraine now has the financing in place to scale up its innovation advantage and produce huge quantities of drones to further take the war to Russia. Further, Ukraine is now leveraging off the rebuild in Europe’s military industrial complex to take that drone/missile production to even higher levels. Russia’s $2.5 trillion, and declining economy, just cannot compete with Europe’s $25 trillion economy. Putin started an arms race with Europe, that Russia simply cannot win now. Ukraine is the spear, or tip of the drone, of that increasingly engaged European arms industry. The writing is on the wall now for Russia, the war has turned in Ukraine’s favour. Ukrainian deep strike drone and missile strikes on Russia are just going to get worse, wearing down its energy infrastructure and military industrial complex. Shortages of fuel and products is just going to get worse for Russians. Their mood is likely to sour further which will be a major challenge for Putin to manage given his limited wins in Ukraine.

© 2026 Timothy Ash

https://timothyash.substack.com/p/putin-is-completely-fucked?r=17e8q4&utm_medium=ios&triedRedirect=true

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CRIMEA WAR IN UKRAINE DRONES

OPINION: Ukraine Creates Multiple Risk Points Now for Putin

In brief: Tim Ash argues that the war in Ukraine is entering a more confident and strategically advantageous phase for Kyiv, driven by advances in drone warfare, expanding European financing, and Ukraine’s growing ability to scale domestic defense production. He says Ukraine is increasingly taking the fight deep into Russia while tightening pressure on Crimea and Belarus, potentially reshaping Moscow’s strategic calculations.

Full article here :

https://www.kyivpost.com/opinion/78763

Meanwhile, Lavrov carries on as normal: