Trump's tariffs shake Russia's economy: National Wealth Fund dwindles amid oil price collapse
Russia is grappling with significant challenges due to U.S. President Donald Trump's tariffs. The collapse in oil prices, triggered by the U.S. tariff war, has had a devastating impact on Russia's oil industry and, consequently, its financial system. The Russian Finance Ministry is compelled to dip into the "rainy day" fund again—the National Wealth Fund (NWF), reports The Moscow Times.
The introduction of U.S. tariffs has triggered a decline in global oil demand, leading to a drop in prices. For Russia, whose budget heavily relies on oil and gas revenues, this situation has turned critical. According to the Ministry of Economic Development's data, in March 2025, the average price of Russian Urals oil was $58.99 per barrel, significantly below the budgeted $69.7.
The drop in oil prices, along with reduced production volumes, led to a contraction in Russia's oil and gas budget revenues. In March 2025, these revenues dropped by 17%, with a 10% decrease recorded in the first quarter. The Russian government is forced to make up for budget losses.
From April 7 to May 12, the Russian Finance Ministry plans to sell foreign currency from the NWF amounting to 1.6 billion rubles daily ($19 million), totaling 35.9 billion rubles ($430 million). Once a "safety cushion" for Russia's economy, the NWF has been greatly diminished during the war against Ukraine and under sanctions. As of March 2025, the fund's liquid assets have decreased by about two-thirds, reaching $37.5 billion. Continued sell-offs of the NWF’s assets to support the budget might deplete it entirely, jeopardizing the country's financial stability.
Paradoxically, amidst the decline in oil revenues, the Russian ruble strengthened by 26% against the U.S. dollar since the beginning of the year. However, this strengthening negatively impacts the budget since oil and gas export revenues are in foreign currency and decrease when converted to rubles. Consequently, the budget deficit is widening, prompting the government to increase borrowing or use the remaining reserves.
The tariffs introduced by the Trump administration and the subsequent drop in oil prices have wreaked havoc on the Russian economy. The reduction in oil and gas revenues, depletion of the NWF, and the need to increase borrowing pose substantial threats to the financial stability of the aggressor nation.