01/05/2026
Oil has flipped from scarcity to surplus, and that shift is crushing Moscow’s leverage. Brent has held near $60 per barrel even through major political shocks, signaling that fear no longer sets the price. Buyers now have options, and sellers take what they can get. Forecasts for 2026 point toward a ceiling near $55, a level that turns Russia’s war economy into a permanent tradeoff machine.
Russia built its 2026 budget around Urals crude at $59. That target ignores the reality that sanctions force discounts and add a growing “hassle tax” in shipping, insurance, and enforcement risk. The price on the screen is not the price that reaches Russian accounts. As friction rises, realized revenue falls, and discounts function like a second sanctions regime that compounds every month.
A sustained ceiling hits the Kremlin where it cannot improvise. The state must keep paying 3 bills that refuse to shrink: the war bill, the internal security bill, and the patronage bill that buys elite loyalty. When revenue compresses, the regime turns inward. Higher consumption taxes and nonstop draft administration are not routine policy, they are extraction tools used when cash is tight and coercion is cheaper than consent.
Chronic low prices do not create a single dramatic break. They erase options. Over time, coordination weakens, rivalry sharpens, and the cost of control rises exactly as battlefield flexibility shrinks.
Source: Jason Jay Smart
A few are claiming that a prolonged war favors the mafia state, while most think that a longer war will break their financial back. I tend to believe the second group. Of course, this is viable only if Europe and the rest of the free world don’t chicken out meanwhile.