
Max and Maria are joined by Hanna Notte and Janis Kluge for a deep dive on how the Iran war and turmoil in global energy markets continue to impact Russian foreign policy.
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Welcome back. I'm Max Bergman, Director of the Stewart center and Europe Russia Eurasia Program at csis.
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And I'm Maria Snigavaya, Senior Fellow for Russia and Eurasia.
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And you're listening to Russian Roulette, a podcast discussing all things Russia and Eurasia from the center for Strategic International Studies.
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Foreign.
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And welcome back to another episode of Russian Roulette. I'm Max Bergman here with my co host as always, Maria Snegavaya. And today we're building on the discussion from our most recent bonus episode looking at the ongoing Iran war and what it means for both Russia's broader Middle Eastern strategy and its place in global oil markets. How is this impacting Russia's economy in particular and therefore the war in Ukraine? To help us dive into this topic, we've got two excellent guests, both of whom we are calling on from Berlin. First, our dear colleague, Hana Noti. Hana is the director of the Eurasian Non Proliferation Program at the James Martin center for Non Proliferation Studies in Monterey, California and an Associate fellow with the Kennan Institute. Most importantly, she is also a senior associate with our very own Europe, Russia and Eurasia program here at csis. And among the many topics Hannah covers is Russian foreign policy in the Middle East. So she's perf positioned to help us better understand what is going on in the Gulf presently. Next, we're joined by the always informative Yanis Kluge. Yanis is the deputy head of the Eastern Europe and Eurasia Division of the German Institute for International and Security affairs, swp. Yanis is an expert on the Russian economy and the Russian budget and will be helping us make sense of how turmoil in global oil and gas markets impact Russia's financial position. So let's get to it. Thanks both of you for coming back on Russian Roulette. Hannah, let me maybe start with you. There's a major war going on with a partner of Russia. This is, I guess, the second time in 2026 that a partner of Russia has now been attacked by the United States. How is Moscow seeing this current conflict? What is it doing to. To help the Iranians? Maybe you could just sort of give us the Kremlin perspective at the kind of 20,000 or 15,000 foot level of how it's. So seeing this war.
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Sure. Glad to, Max, and happy to be back on the show. I think I'd start by saying that what the Trump administration called Operation Epic Fury was launched in late February. This was a principally undesirable situation for Russia because it further exposed a certain Russian impotence inability to steer, developments that came after a string of setbacks in Russian foreign policy over the last few years. Thinking of the fall of the Assad regime in Syria in late 2024, which of course happened before Trump's return to the White House. But then the abduction of Nicolas Maduro in Venezuela earlier this year and already the 12 day war against Iran last summer. So an inability by Russia to support its partners that are coming under coercive pressure or even under the use of military force by the Trump administration. And I would add here the fact that I think the killing of Ayatollah Khamenei within the first 24 hours of this operation, after the abduction of another head of state, Nicholas Maduro, earlier this year, these are sort of displays of US Impunity that Putin, I think, fundamentally doesn't like the US Acting this way and successfully acting this way and Russia being unable to deter the United States from doing so. Now, having said all that, I think it's very clear almost four weeks into this war that there are second order effects and unintended consequences of this war that are clearly benefiting Russia. The first is the elevated oil price, which Yanis, I believe will talk about more over the course of the conversation. So Russia getting more revenues from oil exports. A second factor is the diversion of Patriot interceptors from Ukraine to the Gulf Arab states which need to defend themselves against Iranian strikes, which will need to replenish their arsenals after this war ends. So this is going to be an issue, I think that's going to be with us for some time. And then, you know, at a, at a more fundamental level, I would say that this is now also turned into a situation where there's a question over the United States ability to, to translate its superior military might into clear political objectives. And in this sense, the current war is different from the 12 Day War last summer or from the operation against Maduro. If you looked at the Russian reaction to the 12 Day War last summer or to the abduction of Maduro, there was almost a certain, a certain Russian envy in the reaction. Why can't our own, quote, unquote, special military operation be like that? Why can't we be as effective as the United States and Israel now? The current war is turning. I mean, I don't want to yet call it a quagmire, but it is deeply unclear what the end game is here. And so from a Russian perspective, you know, suddenly Russia can actually posture as the adult in the room, which it is now doing on the UN Security Council. Calling for an end to the war, calling for stability, all while the Trump administration looks, you know, slightly unhinged and sort of not really. It's not really clear what it is doing. And so what is Russia now doing? That a war that it fundamentally did not want and was unable to deter is now unfolding and Russia is reaping some benefits. I think, as seen from Moscow, it's not the worst situation if this war continues, because Russia can then continue to reap those tangible benefits that we talked about. Though I also think that Russia does not want to see this war escalate catastrophically, because if it precipitates a global economic recession, and maybe this is something Yanis wants to weigh in, there could also be downsides for the Russian economy. And moreover, an escalation in the war always brings with it the risk of Iranian fragmentation or perhaps regime change in Iran. So Russia also stands to lose something here. What is it doing in the meantime? There's some evidence of military assistance to Iran, obviously, short of direct military intervention. We've seen the Russians provide some targeting data to the Iranians, perhaps operational guidance for Iran as it launches its waves of shahed drones against targets in the Gulf. Then there is very strong diplomatic backing that Russia is giving to Iran on the UN Security Council. And I think there are sort of two objectives here that the Russians are pursuing. On the one hand, this kind of diplomatic backing helps Russia soften the image of having abandoned its ally. You know, Russia is, after all, doing something for Iran. And then, as I already said, it sort of helps Russia project this image of a responsible actor that is trying to pacify and stabilize the situation.
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Thank you so much, Hanna. This is very helpful. Yanis referenced the windfall of revenues that Russia may be benefiting from as a result of this escalation. Maybe you can tell us a little bit about what's been happening in global energy markets over the last few weeks. And how does the situation compare to 2022? I have seen some discussion among the analysts, some saying that Russia is already benefiting from the oil revenue, increased oil revenues. Others are saying that the real benefits will only come in April. Given how the taxes are structured for the Russian budget, any overview of that will be very helpful.
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Sure. Excellent question. Before I get to the technical parts of it, I think I have to emphasize that we are in the middle of a historic disruption of oil and gas logistics. And this cannot be overstated. And the comparison to 2022 will show that the disruption. Right now, it's probably more of a political Disruption, it's not a natural catastrophe. It's Iran blocking the Strait of Hormuz. So in theory, this could be reversed any second. So in that sense, there's a lot of uncertainty how long it will persist, but it's massive. And in addition to this logistical disruption that oil and gas and other chemicals cannot get out, there's increasingly also supply disruption. So we have supply offline and we have some also supply destruction, which is permanent, at least with regards to lng. So this is really a massive development and this is not at all represented in today's market prices. And this is important if we think about the impact on Russia, because when we think about the future and scenarios, we always assume that today situation will continue for maybe a year and then we calculate what the impact would be. But if there's one thing that's certain is that today's situation will not continue because if the disruption remains in place, we will see a massive escalation of prices. And if the disruption disappears, then we could see the opposite happening. So we more like in a fork in a road. And today's prices are not representative of what's ahead. If you look at 2022, in early 2022, we had of course, the beginning of the full scale invasion. We had a lot of chaos, quite frankly, in global shipping. It was related to, on the one hand, shipping, also financial industry. Everybody was uncertain about what was legal, what was not legal, what could we do, what trade can we still do with Russia? So there was a lot of chaos and this led to a brief interruption in almost all Russian foreign trade. You know, not just with Western countries. It's just basically paused for a brief period of time. During that time, there was a fear that this chaos and the sanctions would lead to a disruption of Russian oil supply of 3 million barrels per day. In the end, Russian production for two months fell by 1 million barrels per day. Today we are speaking about a disruption of maybe around 15 million barrels per day that should usually go through the Strait of Formus and cannot be easily routed somewhere else. So this is the magnitude of the problem. And this is why if you look at the future, we have to basically think of scenarios and some can be quite extreme. Interestingly, in 2022, we had higher oil prices than now. So back then WTI was at $120. Currently it's below 90. So you can see that today's price, actually they are pricing in that the straight up Hormuz will open relatively soon, or at least open largely, otherwise it cannot be explained of course, 2022 was a different market situation. It was the recovery from COVID so there was a lot more demand. The market was much tighter in 2026. The market was very well supplied. But, yeah, so this was the situation from Russia's point of view. We had actually, in the beginning of this year, end of last year, the situation was very bad, mostly because we had new sanctions on the two largest oil producers, Lukoil and Rosneft, last autumn. And this led to problems selling Russian oil. And Russian oil basically accumulated at sea. So there were tankers looking for buyers and they couldn't find buyers. They had to lower the prices more and more. So we had large discounts on Russian oil. And this led to a situation where Russian oil revenue really plummeted. It was really already last year it was low, and beginning of this year, it was half of what it was last year. So really, from my calculations, what I saw in the data that is available might be a historical low, at least since the Putin era started. It was quite a bad situation. Of course, some of that now changed also because of the General license on U.S. sanctions on Russian oil.
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Yanis, maybe you could just explain that a little bit, because one of the interventions of the Trump administration in order to try to address the rising oil prices has been to allow the oil at sea, or to desanction at least the Russian oil at sea. Maybe you could talk a little bit about that. And so what's the effect of that?
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Yeah, so this is essentially a quick fix. I think it's a measure that has rather limited impact. But of course, if you see Russian oil building up at sea, and we're speaking about the amount of oil at sea rising from maybe 100 million barrels to 180 million barrels or something similar to that, and this is then 60 to 80 million barrels that could be sold off, and this could alleviate the situation, at least for a few days. And I think that this was the goal of this measure. I think it's important to emphasize this is not lifting sanctions. It's very limited. It's only oil currently with the latest general license that was already on the water on March 12, and it can now be sold until April. So this is. So it's a very limited license, but of course it can be extended. And the effect of this is that the discounts on Russian oil are disappearing, and we are now even seeing premium on Russian oil. So Russian oil is sold for a higher price than Brent in Indian ports, for example. You can see that there's also some really like some regional shortages that play into this. And of course, this is hugely beneficial for Russia. At the same time, shipping costs got really expensive. There's also a downside for Russia that compensates for some of these losses in the discount. But at the same time, overall, it is really beneficial. And we can assume that Russia currently gets about twice as much per barrel as they did in previous months. So before in December, January, they had around $40 per barrel as the oil price that was used to calculate taxes. And I think it will increase to maybe around $80 at today's prices. And this is, of course, a big increase in revenues.
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And if I may clarify, Yanis specifically, are Russians already getting higher revenues? Because I've seen some debate among the analysts. My understanding was original that it's only in April that the the budget will really benefit from it. But I see in Bloomberg that daily Russian return has increased from $135 million to $270 million, so literally doubled. And I also see that Russia now delays changes to fiscal fund. Originally, they planned to decrease the expenditures for the reasons that they flagged. They no longer planning to do so. So it seems that they're already benefiting over it as we speak, not waiting until April. If you could provide some details about what it means for the Russian budget going forward, that'd be much appreciated.
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So the way the taxation works is that it's, you know, the price is set based on the previous month, the price that it's used for calculation of taxes. So at the mom, Russian oil and gas companies are benefiting, but they are still paying a lower tax rate. So the budget in March, I think that the effect on the budget will be relatively minimal from the current situation, but in April, then it will show. Yeah, as you point out, because the situation in the budget was pretty dire already last year, but potentially even more this year. There was a lot of discussion about budget cuts. And you could see that there's actually pressure on the system because of the economic situation. And budget cuts are always politically risky and difficult. And so I believe that the current situation allows Russia to postpone them. From what I'm seeing, Russia's at least official statements are still very careful, so they are aware that this can change any second. So if there's, you know, if the Strait of Hormuz opens, then maybe some of this will even be reversed. And for some time we might have lower oil prices because right now there's a lot of risk also priced in. So they are careful. But as you say, it's definitely Makes it easier to make ends meet in the budget to continue financing the war. And if the price actually remains very high, we will see that Russia will replenish its national wealth fund, which was almost depleted at the end of last year.
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Yanis, maybe we could level set for a second on the economy. So it seemed to me that this was a year where Russia, at least prior to the Iran war, was really going to struggle economically, where there was going to be a lot of grit in the gears and the ability for Russia to continue to finance its war effort. It was going to be able to maintain that. But there was, you know, we're going to start entering a year where real tradeoffs had to be made. This was going to potentially lead to more angst in the system. And now it feels like they've just gotten this huge windfall of revenue. And all is sort of, you know, it's springtime in Moscow and everything is sort of happy, and you're looking at sort of a very flush summer. You can sustain this war indefinitely. That some of those economic concerns that may have been grading on policymakers in the Kremlin, I don't know, probably gone. Is that your take as well, that they were concerned, there were real concerns, but now those are probably alleviated. How do you think the Kremlin is thinking about how the economy is impacting the war?
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I think that the change is not as big as you describe it. The decision makers in Moscow are much more careful in assessing this. And even if you look at the numbers. So if for now, we say there's a scenario where today's prices remain in place for the rest of the year, then Russia will maybe get 2% of GDP in additional budget revenue. Last year, Russia's deficit in the consolidated budget was close to 4% of GDP. So, yes, of course, it helps a lot because 2% of GDP is a big bonus, so to say, for Russia. But it doesn't fundamentally change the situation. It doesn't return Russia to the same economic boom that it had in 23 and 24. And it's built on a very weak foundation because at any point in time, this can reverse. So at the moment, this is just a snapshot, just one point in time. And if this persists or escalates, then, yes, then we might see this situation where Russia benefits economically and also politically. I mean, we also have to speak about what this does to Russia's status in the world as an energy superpower if the crisis really escalates. But yes, I mean, so far it's Just a few weeks. And at the end of the year, we will know how much the impact really was.
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Yanis, I think I'm going to follow up with that question in a bit, but let me turn about. But what this will mean if the crisis goes on. But, Hannah, let me, let me turn back to you. It strikes me that the Kremlin has a bit of a fork in the road decision to make when it comes to supporting Iran. On the one hand, the Iranians are at war with a country that has been providing lots of weapons and targeting data to the Ukrainians that are killing Russians. This is sort of like, you know, a major opportunity to strike back and hit your, quote, unquote, main enemy and to support the Iranians in sort of whatever way they can, either providing, you know, military materiel or other intelligence support. On the other hand, it does strike me that Russia is trying to cultivate a bilateral relationship with the United States. They're trying to sideline Ukraine, you know, that there may be an opportunity actually for Russia to gain its foothold in Washington, to maybe even play as some sort of neutral broker. How do you see the Kremlin kind of approaching this conundrum of how you balance trying to, you know, establish better relations with Donald Trump at the same time being pulled in the kind of classic Russian direction of trying to strike back at their main enemy?
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Yeah, for the moment, you can reject
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the frame as well. So.
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No, I think the frame is accurate. The frame, I would expand the frame to note that Russia does not just need to or desire to balance between support for Iran and amicable relations with the Trump administration, but there's also its relations with Israel and the Gulf Arab states that are really important here, where Russia needs to balance rather carefully. I think for the moment. Now, almost one month into this war, this Russian balancing act is working. We know that Russia has provided calibrated military support to Iran and has not thus far antagonized the Trump administration. I mean, the Trump administration is aware of this kind of support, and President Trump personally has sort of brushed it aside, sort of saying it's not all too consequential. And also, well, the Russians are doing for Iran sort of what we're doing for Ukraine, sort of equivocating in that way. But it is true that this balancing act could become more precarious areas if Russia decided to step up its support for Iran. So maybe we can sort of take a minute to discuss how likely or conceivable that is. Now, I don't think that we will See sort of direct intervention of Russian forces in this war. The Russians have stressed time and again that their comprehensive strategic partnership agreement with Iran does not have a clause that points to direct military assistance. That is something that they stressed last summer. That is something that they stress now. I don't think that the Russians actually have the military bandwidth to intervene more forcefully in this war, even if they wanted to, even if the sort of political calculus was pointing them in that direction. Max, the one question mark I have over a more forward leaning Russian intervention is what happens if we see sustained US And Israeli military pressure on Iran that then leads eventually to greater internal instability inside Iran, possibly even an insurgency at some point down the line as a worst case scenario, civil war or Iran's fragmentation. First of all, I think this is one of the worst case scenarios from Russia's point of view because it would then lose a partner in Iran and with that leverage in the Middle east that Russia has, courtesy of its special relationship with Iran. But a considerable weakening of Iran or its fragmentation would also shift the balance of power in the South Caucasus to the benefit of Turkey and Israel at a time when Russia itself has been weakened in the region. So there are all these sort of undesirable consequences that come for Russia with the weakening of Iran. Now, in a situation of internal unrest, could we see Russia doing some kind of emergency deployment or sort of send some forces to assist the Iranian regime against domestic unrest? I don't find that entirely inconceivable. But the Russians would still have to weigh the political and the military and the economic costs of any such deployment vis a vis this desire to maintain relations with the United States and Israel. You know, I've already said that I think the Russians have so far managed to balance this support for Iran, this calibrated support vis a vis their relationship with the United States. One small point I'll also make on this is that we've seen this interesting bifurcation in Russian posturing and rhetoric that we've seen over all of last year continue amid the current war. And by bifurcation, I mean the following. We see the Russian MFA coming out attacking or criticizing the United States and its conduct quite loudly, including at the UN Security Council, obviously Foreign Minister Sergei Lavrov sort of leading the charge here. And then we see the Kremlin and Vladimir Putin specifically being very restrained. I mean, even when Ayatollah Khamenei was killed and Putin made his first remark, he talked about a cynical murder, but he did not name Israel or the United States Directly. And this is a theme that we've seen all of last year playing out, this sort of, this bifurcation in the Russian positioning. So I think we'll see more of that going forward. Final point here, what's really interesting to me is how the Russians are going to navigate this ongoing support for Iran with their relations with Israel and the Gulf Arab states. So with Israel, I mean, we have a, a long standing relationship that's important to Russia. But we've had tensions in the past where the two sides found themselves on opposite sides of a conflict. Thinking of the Syrian Civil War, thinking of the war in Gaza, where Russia was rather forward leaning again at the un, tapping into global grievances over Palestine and sort of trying to exploit those opportunistically. And that led to a cooling in the Russia, Israel relationship over the last few years. Now we've seen those tensions slightly ratcheting up again. So last week the Russians summoned the Israeli ambassador because an RT journalist was injured by an Israeli airstrike in Lebanon. And last week as well, we've seen Israeli airstrikes on some transports in the Caspian Sea that allegedly transferred some Russian assistance to Iran. And so far the Russians are restrained in their reaction. And I think that will continue because there's an interest on both sides, the Netanyahu government and the Kremlin, to not let this sort of lead to an unraveling of the relationship. Another matter is the relationship that the Kremlin has with the Gulf Arab states. You know, here we have obviously important economic relations, speaking of energy markets, an alignment in OPEC that has always been important to the Kremlin. And now we're in a situation where the Iranians are using shahed drones to target Gulf infrastructure and Gulf states. And if there's a growing perception in Gulf capitals that the Russians are directly assisting this effort, this could also, I think, create some friction. And so taking all of this together, what this means for me, Max, is that the combination of a Russian aversion to costly military entanglement at a time when its priority remains the war in Ukraine, coupled with this need to balance these different relationships in the Middle east, this together means to me that the Kremlin will not go all in sort of supporting Iran militarily, but will continue to navigate this cautiously because it has all these different irons in the fire.
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It does strike me though, that the Russia, Israel relationship, for instance, matters much less to the Israelis and perhaps to the Russians than it did a few years ago or before the collapse of Assad. I was in government in 2015. And you could really see the shift in Israeli thinking when suddenly the Russians were in Syria and that they had to deal with the Russians. And so now that the Russians aren't really there and it's a totally different dynamic, I think that both impacts how the Israelis and how the Gulf states perhaps perceive the Russians. And also if the Gulf economic model is in real trouble, that may also, you know, mitigate some of the concern on Moscow's end. I guess the follow up question is when it comes to Ukraine, it seems like the Gulf states have a real interest now and suddenly buying Ukrainian air defense capabilities, bringing the Ukrainians in. And I would think the Ukrainians would start to leverage, to use that as leverage to say, well, you're on sort of neutral when it comes to our war. We want to see you take some action against the Russians. So I could see the shifting alignment here that may kind of lead to more of a bifurcation. I'm just curious for your reaction to that.
C
Yeah, look, it's true, I think that Russian power projection into the Middle east has eroded since its peak, you know, a decade ago with the intervention in the Syrian civil war, which gave the Russians a lot of leverage vis a vis all of these players. But I think the reality in today's Middle east is still such that none of these players that you just mentioned wants to risk really antagonizing the Russians because they are hedging in a very uncertain environment and they're also hedging over a very uncertain US Force posture and foreign policy in the region. So yes, to the Gulf Arab states, the relationship with Russia is not the utmost priority. But I think when it comes to opec, for instance, or the economic relations, or just a simple awareness that Russia at the end of the day is a permanent member on the UN Security Council, you will not want to totally antagonize Moscow. But at the same time, Russia is not the only, let alone the primary source of hedge for these countries either. You have Saudi Arabia making a defense pact with Pakistan and also turning more to China. So it's sort of Russia is one hedge among many, I think, for the Israelis. I mean, I agree with you that the fall of the Assad regime in Syria removed sort of both an irritant in the Israel Russia relationship and also a source of leverage for Moscow. But Max, you know, I would say, I mean, I, I was last in Israel a month after the fall of Assad in January 2025. In my sense, speaking with, with folks then at that Time was that there was still an awareness of how Russia can hurt your interests if you're Israel speaking of a Jewish diaspora inside Russia, but also speaking of Russia's relationship with Iran. So there's still things that the Russians can do that can hurt Israeli interests. And so you have to have a channel of communications and you want to weigh in with the Russians. And on that last point, you know, what concerns me or what I've been thinking about is what if this war ends without a change of regime in Iran and in a situation in which the Islamic Republic will stay intact, with the current regime still in place, or maybe with one that has sort of a greater role for the irgc, a regime that is greatly weakened, battered, revangist, that kind of Iranian regime will quite likely become even more reliant on Russia and turn to both Russia and China as it will need to reconstitute militarily, restore its defense industrial base, restore its missiles and drones. So it's. I think it's fairly. It's. Or let me put it this way, it's not at all unlikely that Iran in the future could become even more dependent on Russia. And so, as seen from Israel, this is a reality that you will also need to manage. And so this is one of the factors that I think explains why the Israelis still, you know, will wish to preserve a constructive relationship with Moscow.
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Hannah, thank you so much. And obviously, the elephant in the room is the question about the impact of this development on the war. This is the question for both of you. Yanis, maybe I'll start with you. How do you see the war in Ukraine being impacted recently? Ukrainians actually had some really important successes on the battlefield, and I think they even were able to retake some of the territories occupied by Russia for the first time in a couple of years. But with these unprecedented benefits that Russia is receiving, do you think this can turn the tide back again?
D
I think that it will not change Russia's behavior a lot. It will not change Russia's ability to fight this war in a significant way, at least not in the short term. What it will change is our behavior, what it might change. First of all, this is about attention. Of course, our attention now is not on Ukraine. And Ukraine depends on our continuous support. And because of that, it also depends on us paying attention to what's going on in Ukraine. And of course, this is potentially a problem. The second problem is that this crisis might create a sense of weakness in European societies. This might help populist politicians. This might actually lead to real money Problems for governments, even an economic crisis in the eu. And of course, this is not a good background for increasing support to Ukraine. So to me, this is all about the way we behave, which might be impacted by the war in Iran. I think that one thing where Ukraine is maybe not sad, that attention is gone, is sort of these diplomatic efforts of Wykoff and Trump, which also created some pressure on Ukraine, was not always to Ukraine's benefit, to say it mildly. When Wytkov got involved and he's now busy, so that might be a plus. But at the same time, it affects us and it also affects our sanctions policy. Additional sanctions increasing the pressure on Russia is now off the table. For the time being, it's not politically feasible. We already delayed plans to completely phase out Russian oil, for example, in the eu. I mean, we hardly import any at the moment. But there was a plan to completely shut it down and this got postponed. We have now the general license by the US So the sanctions exemptions, and they might get extended. So we see that the sanctions pressure is decreasing. And yeah, all of this, I think in total is of course weakening Ukraine's or potentially weakening Ukraine's position if we don't pay close attention and of course, try to avoid that from happening.
B
And just a quick clarification, the ability of Russia to recruit more troops to fight this war will not be affected fundamentally by increased budget revenues.
D
Well, the money that it costs to recruit these soldiers is only a small part of the military budget. So it's maybe around 10% of the military budget at max that the recruitment of new troops costs. And from what I can see, recruitment is a bit slower than last year, but it has not collapsed. So there are still men out there that are willing to go to war. The bonuses continue to increase. I think that the regions will need some more transfers from the center, from Moscow to keep the system running. But in general, I believe that these additional revenues now will not impact the system in a significant way.
B
Thank you so much. Yiannis and Hanna, what do you think? Anything to add?
C
Yeah, maybe just two points to add to Yiannis's excellent points. I'm worried about what the diversion of intercept ammunitions from Ukraine to the Middle east will do and also how that will shape Russia's calculus or sort of aggressiveness amid the incipient spring offensive that we're seeing. We're recording this conversation on 25th of March. We saw yesterday, I think, one of the largest daytime drone attacks that Russia conducted since the beginning of the entire war. And I'm sort of wondering, might we see more ballistic missile strikes, not drone, but ballistic missile strikes by Russia over the upcoming period, given that Ukraine has few alternatives to defending against ballistic missiles to US Made interceptors, just to sort of put more pressure on Ukraine to try to erode Ukrainian unity and morale at a time when the spring offensive is underway. So the interceptor issue I think is one to watch. And then in terms of negotiations and the lessons that the Kremlin might take from the ongoing war with Iran, I guess it all depends on whether you believe that Russia was at all interested in serious negotiations through the Wykov Dmitriev Channel before this war broke out. And of course, observers have different opinions on this matter. But I do want to point attention to the fact that we've seen quite a bit of commentary coming out of Moscow after the beginning of this war to sort of say, well, this really shows that the United States cannot be trusted at all. Negotiations with it don't mean anything because Wyckoff was talking with the Iranians and was about to talk to them again, and then the war started. So what does it even mean to be engaged with Steve Wyckoff in a channel? And if you add to that possibly the kind of paranoia that's also fueled in the Kremlin by the killing of Ayatollah Khamenei. If you add these kinds of factors together, I wouldn't be surprised if all of this only leads to a hardening of the Russian position as it looks at the war in Ukraine and just basically concludes that it needs to pursue its interest on the battlefield because a deal with this US Administration that can satisfy Russia's interests is simply not to be had.
A
And Hannah, just to highlight a new piece that we have at CSIS on the interceptor issue, it effectively calls for a new EU ASAP program. This is a program that the EU did to try to expand ammunition production, but to do that for air defense, because in our read, one of the major problems for Ukraine is that it's just not going to get resupplied with Patriot interceptors because the US Is going to run short, Gulf states are going to run short. And it seems pretty clear number one priority for the United States defense industry is always the United States. And then is Ukraine going to beat out Gulf states? I think that is pretty unlikely at this point. And so calling on Europeans to really invest in their own air defense production, because Europeans do have production capacity or capabilities, they just haven't really invested in it. Giannis, maybe if I could turn back to you, Hanna Sort of started out by talking about how, you know, this might start. This sort of looks like a quagmire. Some of my former colleague Alon Goldenberg, for instance, has a piece in Foreign affairs basically saying the US Right now has no good options. I think there's a growing consensus that Iran really has its hands around the Strait of Hormuz as, as a chokehold. Does the United States therefore make concessions to reopen the strait, which it currently looks like they would have to do, or does this war escalate and go in a different direction? Let's just go in that quagmire direction and say that this is going to last for a long time, that oil is going to be sort of stuck behind the strait and that oil prices right now are undershooting and that are looking to go up perhaps very quickly to close to $200 a barrel. I've seen estimates. What does that mean for Russia? And let's say that's prolonged. Let's say we're looking at a situation where this war is going to go on. It's going to last for a number of weeks, months into the summer. What does that do for Russia's economy?
D
Well, economically, of course, there would be huge benefit from this. It's not just oil. It's also gas, fertilizer, essentially, also coal. So about two thirds of Russia's exports are tied to this crisis and have seen some really big price increases. So we could see another year like 2022, when Russia had record revenues, both in the budget and also export revenues. And yeah, this would mean not just alleviating the current budget problems, it would mean that Russia could regenerate, replenish its national wealth fund, and be set for the next few years. So this could actually help it to sustain this war, of course, much, much longer. It would not just affect the budget, of course, it would also be a strong economic impulse. So Russia would be doing much better in terms of GDP drank of the ruble. So, yeah, in general, this would be, of course, a huge benefit. And I think that not just the economy, it would also mean that Russia, that energy could turn into a very potent foreign policy instrument. So if we think about a situation when there are acute shortages, physical shortages of certain fertilizer or oil or lng, and then Russia can decide to send a ship to a certain country that behaves in a certain way or not do it, you see that there's a lot of potential for blackmail. Yeah. Fortunately, in the eu, we have more or less isolated ourselves from Russian energy and it's not easy to go back. The sanctions system is so complex that it cannot be easily changed. It's a bit different from the US So I think that we are for now somewhat protected from these attempts to put pressure or to manipulate us with energy. But it's possible and of course in a crisis situation this becomes so much stronger and so much more convincing. And we will see Russia using that similar to what it did in some cases in 2022.
A
Hurrah for the complexity of the European Union. Maria, over to you becomes the last
B
question for our dear colleagues is the role of China. China is a partner of both Russia and Iran, purchased a significant amount of oil from both countries at the same time. Again, seem to have tried to maintain some cautious, restrained position but of course it's ultimately fundamentally important for geopolitics, the global economy. So how do you are tracking when it comes to China's response to them going hostilities? What do you are looking at? Hanna, let's start with you.
C
Yeah. I think so far the Chinese positioning on this war confirms a certain Chinese risk aversion, an aversion to entanglement that we've seen already last summer. We've seen, I think some indication by US intelligence that the Chinese may be providing Iran with financial assistance with spare parts with missile components, that they've been talking to the Iranians about allowing passage for their vessels through the strait. But we have not seen China hinting that it could become more engaged in this war. And so I think this sort of reconfirms a certain assumption that we had about Chinese foreign policy in the Middle east prior to this war. What I am particularly interested in and tracking going forward is the implications of this war on the Russia China relationship. So a few things to note here. I think the Russians and the Chinese already prior to this war became very aligned in different multilateral fora in backing Iran over the snapback of the sanctions in the fall, whether that's at the IAEA or on the UN Security Council. And it's going to be interesting to watch whether and to what extent this continues. We have an upcoming NPT review conference starting in New York in a few weeks. And so this sort of more robust Russian Chinese entente in multilateral diplomacy is important and Iran is sort of a catalyst for that. There's also the question over China becoming more reliant on Russia or turning more towards Russia when it comes to oil and gas. What will we see in terms of negotiations on the power of Siberia 2 pipeline is a question that I would ask, and then maybe a final element here, and I'm just sort of throwing this out speculatively, but, you know, if we have a protracted war with Iran and the continuation of the war in Ukraine, might we actually see Russia and Iran competing for certain spare parts or components that come from China? We know that both the Iranian and the Russian shahed production relies heavily on components for China. And we're sort of so used to think about Russia, China and Iran as an axis of countries that support each other. But here we could also come into a situation where Russia and Iran might actually be competing because these supply chains of components might be finite at some point.
D
I think I agree with Hannah that it's very interesting to look at the Russia, China relationship and how this is affected. Of course, this relationship is very asymmetric, most of all in economic terms. And the importance of oil and gas right now, it might bring back a little bit more balance because now Russia is becoming very important to China as sort of the supplier of oil and gas that is not affected by this. So these asymmetry might be. It will still be there, of course, no question. But still this will boost Russia's role in this relationship. And yeah, as Hannah pointed out, it might be what gets the power of Siberia too. So a pipeline that transports oil from Western Siberia into China over the finish line. Right now, it's still uncertain if that is going to happen in the medium term. There's also a risk for Russia because Russia is so dependent on China importing oil and gas. And this is that as a result of this, I'm sure China will double down on electrification and double down on the EV revolution, because if you have now a huge. If most of your cars are EVs right now would be EVs right now, you would be much less affected. And this is, you know, you can really feel the difference for national sovereignty that is created by, you know, having sort of a big share of EVs on the road, in contrast to petrol cars. So I think that sort of the danger for Russia is, and this is not just, of course, vis a vis China, but generally in the world that this sort of the decline of fossil fuels, at least for transportation, and sort of lead to an accelerated decline in demand. The longer this lasts, the more this escalates, the more pronounced this change will be. Think back to the 1970s and what that did to car choices globally. Then we suddenly bought small cars and fuel efficient cars and now we have already pretty good electric alternatives. So I think this will be a major change going forward.
A
Well, thank you, Yanis. I think that's at least a positive bright note. I think to end the conversation on of medium to long term Russian demand destruction because of the clean energy revolution. As someone who recently bought an electric car, they're kind of great. So you have these great alternatives that exist. And so I think that is one of the side effects that we'll probably see from this war is sort of an expansion of switching to electric vehicles. Well, on that note, I want to thank you both for joining us from from rainy Berlin. It is sunny here in Washington as the cherry blossoms are in bloom. We could have gone on for another, you know, hour or so. There's a lot more to talk about. We're going to have both of you back on the show soon. But big thanks for calling in and we will see you both soon.
B
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A
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B
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Title: How the Iran War and the Price of Oil Impact the Kremlin's Calculus
Date: April 2, 2026
Hosts: Max Bergman (CSIS Director, Europe, Russia & Eurasia Program) & Maria Snegavaya (CSIS Senior Fellow)
Guests:
This episode dissects how the 2026 US-Iran war is influencing Russia’s strategic outlook—particularly its Middle East policy, its relationship with Iran and the US, the ripple effects in global energy markets, and crucially, the direct and indirect consequences for both the Russian economy and the war in Ukraine. Through in-depth expert analysis, the panel explores Russia’s attempts to balance contradictory interests and how oil price surges might reconfigure Moscow’s capacity and willingness to prosecute its broader geopolitical ambitions.
On Russian frustration at US actions:
“Displays of US Impunity that Putin, I think, fundamentally doesn't like...”
— Hanna Notte, [03:52]
On the current disruption of global oil markets:
“We’re in the middle of a historic disruption of oil and gas logistics. This cannot be overstated.”
— Yanis Kluge, [08:08]
On Russian economic windfall:
“We can assume that Russia currently gets about twice as much per barrel as they did in previous months.”
— Yanis Kluge, [13:41]
On Russia’s balancing act:
“Russia does not just need to or desire to balance between support for Iran and amicable relations with the Trump administration, but there's also its relations with Israel and the Gulf Arab states that are really important here...”
— Hanna Notte, [20:14]
On Kiev’s vulnerabilities:
“I’m worried about what the diversion of intercept ammunitions from Ukraine to the Middle east will do and also how that will shape Russia's calculus…”
— Hanna Notte, [35:06]
On the big-picture shift:
“This could actually help [Russia] to sustain this war, of course, much, much longer... it would also mean that Russia, that energy could turn into a very potent foreign policy instrument.”
— Yanis Kluge, [39:45]
On China and long-term energy demand:
“China will double down on electrification and the EV revolution... so I think that the danger for Russia is... an accelerated decline in demand.”
— Yanis Kluge, [45:37]