Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 19 Jun 2025 by Evgeny Gavrilenkov

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Military escalation in the Middle East has pushed oil prices higher by almost 10%. As it is next to impossible to predict the duration of the “hot stage” of the conflict forecasting prices on the energy markets is uneasy. However, it is reasonable to assume that oil prices won’t fall below $60 per barrel. This level could be comfortable for the Russian budget. However, continuous appreciation of the ruble raises more questions than it gives answers. The recently amended federal budget now expects a wider deficit and more borrowing as the target for 2025 oil-and-gas taxes now stands at R8.3 trln (down from originally planned R10.8 trln). However the government assumes USD/RUB at 94.3 as an average annual implying that in 2H25 the USD/RUB should be about 102 (in June on average it is likely to be below 80). If it happens (albeit not seeming likely, albeit not completely impossible) the risk of an increase in Minfin’s borrowing program may not materialize. The Russian FX market currently looks immune from fluctuations in oil prices and various geopolitical events – either positive or negative for the country. To some extent it could be explained by the growing use of the ruble in Russia’s foreign trade. According to the CBR, the ruble’s share in import settlements reached 56.2% in April (up from 50.8% in December 2024). At the same time, the ruble’s share in export settlements rose in April to 52.3% (up from 46.9% in December 2024). As Russia enjoys quite a meaningful trade surplus, foreign buyers of Russian goods need more rubles. Hence, the latter appreciates. Overall, there are too many factors affecting the ruble’s current trends, but its acceptance as a currency for ...