Russia emerges as real winner as Iran war disrupts energy flows

Russia is emerging as a major beneficiary of the war between the United States, Israel and Iran, as higher oil prices and temporary relief from sanctions boost the value and volume of its crude exports, analysts told CNBC.

The Middle East conflict has rattled global energy markets, causing oil prices to rise sharply amid fears of supply disruptions in the Strait of Hormuz, one of the world’s most critical energy corridors.

“Russia stands to gain revenue from rising oil prices, especially as the United States has relaxed restrictions on the sale of Russian crude to India,” said Saul Kavonic, head of energy research at MST Marquee.

Oil prices rose more than $100 a barrel on Monday as traders priced in the risk that conflict in the Gulf could disrupt shipping through the Strait of Hormuz, a bottleneck that carries about a fifth of the world’s oil supply.

Even though oil fell about 7% on Tuesday after US President Donald Trump signaled that the conflict with Iran could end soon, prices are still about 27% higher compared to before the war began.

For Russia, which remains one of the world’s largest oil exporters despite Western sanctions following its invasion of Ukraine, the rebound in prices translates directly into higher state revenues.

Henning Gloystein, managing director of energy and resources at the Eurasia Group, said Russia “has already benefited enormously” from the crisis after Washington granted India a temporary waiver that would allow it to continue buying Russian crude.

“Cargoes have been selling for around $90 a barrel, so this is a big increase in price and sales volume for Russia,” he said, compared to around $50 before the war with Iran.

Higher prices combined with looser enforcement of sanctions will allow more Russian barrels to remain in circulation, providing a short-term boost to Moscow’s finances, analysts said.

Muyu Xu, senior analyst at Kpler, echoed that India’s new purchases have helped lift Russian crude prices while clearing a backlog of cargoes that had built up at sea.

According to Kpler data, Russian crude stored in tankers fell to 118.3 million barrels this week from 132.9 million barrels in late February, suggesting cargoes were moving quickly to buyers.

If the crisis continues to limit Gulf exports, the benefit could be substantial. Gloystein estimates that Moscow could generate tens of billions of dollars in additional state revenue as high oil and gas prices persist.

In addition to the temporary waiver granted to India, Trump is also considering easing oil sanctions on Russia, according to Reuters.

Russia’s advantage may also extend beyond crude oil. Gloystein said Europe could increase imports of Russian liquefied natural gas because there are currently no European sanctions on those shipments, at least until the European Union’s planned phase-out takes effect in 2027.

However, Russia’s ability to take full advantage of the situation remains limited.

Years of sanctions and Ukrainian attacks have damaged parts of Russia’s energy infrastructure, limiting the speed at which the country can increase production or exports.

“The benefit could be significant in the short term because Russia benefits from both higher prices and some relaxation in the practical application of sanctions,” said Carole Nakhle, founder of Crystol Energy. “But the benefit is still limited.”

He added that shipping and insurance restrictions, as well as the concentration of Russian exports on a small group of buyers such as India and China, still limit Moscow’s ability to take advantage of supply disruptions.