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US President Donald Trump’s return to the White House was indicative of the popular mood in America to pursue a protectionist economic policy, ushering in a return of tariff wars to achieve a semblance of parity in balance of trade. So far, Trump has announced tariffs on 90 countries. What is interesting to note is that Russia, along with countries such as North Korea and Cuba, has not been included in the list, with the underlying rationale being that these countries were under sanctions and that Washington’s trade with these countries was minuscule. In the case of Russia, bilateral trade between the US and Russia totalled $3.7 billion last year. Despite exclusion from the list, US tariffs will have an impact on the Russian economy.
With the price of oil falling, the impact of external geoeconomic developments on Russia's macroeconomic stability and how Moscow is reacting to these developments merit continued scrutiny.
Tariffs negatively impact global demand, directly impacting the manufacturing, industry, and services sectors, leading to a slowdown in economic activity. This results in the fall of global commodity prices. Russia is one of the world's largest exporters of natural resources, and most of its export revenue is generated from the export of crude oil and gas. With the price of oil falling, the impact of external geoeconomic developments on Russia's macroeconomic stability and how Moscow is reacting to these developments merit continued scrutiny.
The markets in Russia responded positively to the arrival of Trump; the Moscow stock exchange grew by 6%, and the ruble began strengthening, primarily due to the absence of geopolitical volatility, the falling domestic demand for imports, and the increasing prospects of sanctions easing for Moscow. The ruble further strengthened with the negotiations beginning between Russia and the United States. However, during the same period, the price of oil began to fall due to the lack of global demand, rising threats of recession, a change in the policy of OPEC+ to increase production, and Trump's push for trade wars.
The price of Brent crude fell from $76 per barrel in February to $59 in early April. The lowest since February 2021. Similarly, the price of Russian Ural crude has been progressively falling. On April 6th, the price fell to $52 per barrel (see graph 1.1). The Russian Ministry of Finance reported that the budget from oil and gas revenues fell by 17%. These developments point towards the possibility of the ruble weakening in the near future. According to Alexander Potavin, an analyst at FG Finam, the ruble could weaken to 90-95 units per dollar by the end of spring.
Graph 1.1: Price of Ural Crude April 2024 to April 4th 2025
Note: Average monthly prices of other Russian grades, such as ESPO and Sokol, are unavailable.
Source: Ministry of Economic Development, Russian Federation
Although Trump announced a 90-day pause, Russia's biggest trading partner, China, was not included in the pause, with more than 245% tariffs imposed on Beijing. In 2024, Russia's trade with China totalled $245 billion, with Russia's exports to China totalling $129 billion, of which $95 billion comprised mineral fuels (oil, oil products, coal, gas). With Russia's trade dwindling with European countries, its economic dependence on China has only increased.
The decrease in oil price will result in budget revenue shrinking, and the revenues of oil and oil-associated companies will be under losses (see Fig 1.1). Investments in the private sector will decline, and the government will have to borrow. Since Moscow cannot raise loans from international sources due to sanctions, loans will be raised domestically. Combined with the rising costs of financing the war, this will cause the economy to overheat even further. Thus, it is unlikely that the interest rate, which is at an all-time high of 21%, will come down anytime soon. This means that credit for businesses and consumers will be expensive, and economic activity will slow down.
Fig 1.1: Average decline in profits for 2025-2026 by sector
Source: BCS World of Investments
According to Alexander Firanchuk, a Researcher in the International Laboratory of Foreign Trade Research of the Presidential Academy, in the near future, it is likely that the Trump administration could impose tariffs on Russian exports, particularly on metals, fertilisers and energy carriers, which will lead to a decrease in supplies and marginally impact export revenue. Therefore, Moscow’s ability to adapt its logistics and financial planning to new conditions could help shield the economy from further external shocks, as observed during the great depression, when the USSR was able to execute rapid industrialisation during a period of political-economic upheaval in the US and European Union.
Graph 1.2: Macro-Economic Indicators in Russia from April 2024 to April 2025
Source: Bank of Russia
Moscow has expressed dissatisfaction with the recent tariffs imposed, stressing that they carry serious risks for global economic stability, with the potential to escalate trade tensions.
On the domestic front, the Kremlin has adopted a wait-and-see approach. Elvira Nabiullina, the governor of the Russian Central Bank, stated that countermeasures such as the 'budget rule' would help protect the economy from external shocks. Under the budget rule, the Ministry of Finance would withdraw funds from the National Wealth Fund, a rainy-day financial cushion largely funded by surplus revenue generated from the export of oil and gas, currently valued at $140 billion. With commodity prices falling, it is likely that the NWF will be used to stabilise the shocks. However, the costs of doing so will further overheat the economy, as even considering the talks between the US and Russia on ending the war in Ukraine, the prospects of rapid sanctions easing and the return of Western businesses in Russia look unlikely.
Trump’s announcement of suspending tariffs for 90 days on April 9 saw the oil price marginally recover. Other factors, such as the global growth recovering in a piecemeal fashion, have seen the price of oil stabilise, reducing the stress on the ruble. However, under recessionary conditions, Russia's export volumes will decline because of the falling global demand. With the prospects of sanctions being lifted looking grim, the Russian economy will have to grapple with lower growth rates, higher costs of doing business, and declining economic activity– while shielding itself from external shocks as its dependence on the state continues to increase.
Rajoli Siddharth Jayaprakash is a Research Assistant with the Strategic Studies Programme at the Observer Research Foundation
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Rajoli Siddharth Jayaprakash is a Research Assistant with the ORF Strategic Studies programme, focusing on Russia's domestic politics and economy, Russia's grand strategy, and India-Russia ...
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