Draining Fuel from the Russian War Machine: Oil, Gas, and Sanctions Outlook

Hydrocarbon revenues remain central to Russia’s economic resilience and its ability to finance the war against Ukraine.

Although Russia is less dependent on oil and gas than many petrostates—and hydrocarbon revenues now account for roughly one-third of federal budget income, down from 50% in the 2010s—oil and gas continue to function as the backbone of the Russian economy. Oil in particular dominates, accounting for more than one-third of total export revenues, and the sector generates substantial spillover effects across the broader economy. At the same time, military and security-related expenditures consume over one third of the state budget, rising to as much as 40% when all security costs are included, underscoring the strategic importance of energy revenues for sustaining Russia’s war effort.

Since Russia’s full-scale invasion of Ukraine in 2022, the EU and its partners have imposed extensive sanctions targeting Russia’s energy exports and the technologies underpinning extraction, refining, and transport. By the autumn of 2025, the EU had adopted 19 sanctions packages. These measures have reduced Russia’s cumulative oil and gas export earnings by approximately €100 bn since the oil price cap was introduced in December 2022. However, due to elevated global oil prices—partly driven by the war itself—Russia continued to earn comparable or higher revenues until early 2025, despite exporting less energy than in 2022. Moreover, Europe has continued to channel significant funds to Russia: since the invasion, EU countries have paid an estimated €220 bn for Russian coal, oil, and gas, representing about 20% of Russia’s total energy earnings during this period.

This report argues that western efforts to curtail Russia’s economic and technological capacity have been incomplete. Sanctions are less stringent and suffer from enforcement gaps, limiting their overall impact. Against this backdrop, the report seeks to estimate Russia’s potential hydrocarbon export revenues through 2027 in order to assess its capacity to sustain the war and broader coercive influence over Europe.

Given that global commodity prices and actions by external actors, such as the United States, are largely beyond Europe’s control, this report focuses on Europe’s own political willingness to further restrict Russian energy revenues. By examining political debates, sanctions policy, and energy and climate choices in major European countries, the report evaluates how domestic political dynamics—particularly the rise of radical-populist parties—may either support or undermine stronger action.

Structured across five chapters, the report reviews the role of energy in Russia’s wartime economy, shifts in export destinations and infrastructure constraints, the impact of sanctions and other external pressures, and future revenue scenarios up to 2028. It concludes with recommendations on how Europe can strengthen its position and increase economic pressure on Russia by further constraining hydrocarbon revenues. In particular, it suggests that:

• This moment should be seized to strengthen sanctions, accelerate Europe’s exit from Russian energy, and demonstrate geopolitical resolve.
• A jointly enforced Western oil price cap near $30 per barrel, rigorously applied by the G7, would significantly cut Russian revenues without destabilising global markets.
• Coordinated action with close partners such as the UK, Norway, and Canada would ensure compliance with price-cap rules by denying passage to inadequately insured, improperly flagged, or technically unsafe vessels.
• The EU should intensify measures targeting oil products by lowering the existing price cap and closing the ‘refining loophole’.
• A faster exit would deprive Russia of billions of euros annually with limited alternatives for replacement markets.
• The EU should explore mechanisms such as targeted taxes or duties on remaining Russian energy imports, with revenues earmarked directly for Ukraine.