The ongoing standoff between the United States and Iran is hurting most of the global economy. But not Russia. Data suggests that Moscow has already made billions of dollars of additional revenue from oil sales because of higher crude prices, as well as the fact that the United States temporarily rescinded sanctions on Russia to rein in global costs. But beyond the immediate windfall, how will the conflict in the Middle East aid Russian President Vladimir Putin, including in his own war on Ukraine?
On the latest episode of FP Live, I spoke with Alexander Gabuev, the director of the Carnegie Russia Eurasia Center. Gabuev previously ran the Carnegie Moscow Center, which was shut down by the Kremlin in 2022. Subscribers can watch the full discussion on the video box atop this page. What follows here is a lightly edited and condensed transcript.
The ongoing standoff between the United States and Iran is hurting most of the global economy. But not Russia. Data suggests that Moscow has already made billions of dollars of additional revenue from oil sales because of higher crude prices, as well as the fact that the United States temporarily rescinded sanctions on Russia to rein in global costs. But beyond the immediate windfall, how will the conflict in the Middle East aid Russian President Vladimir Putin, including in his own war on Ukraine?
On the latest episode of FP Live, I spoke with Alexander Gabuev, the director of the Carnegie Russia Eurasia Center. Gabuev previously ran the Carnegie Moscow Center, which was shut down by the Kremlin in 2022. Subscribers can watch the full discussion on the video box atop this page. What follows here is a lightly edited and condensed transcript.
Ravi Agrawal: I want to start with a very narrow focus: oil revenue. What’s the math on how much additional money Russia is making from the heightened price of crude right now?
Alexander Gabuev: My colleague, Sergey Vakulenko, who is one of the best in business, calculates that every $10 increase per barrel gives “Russia Inc.”—the state and companies together—roughly $100 million a month. The intake increases as the oil price grows and stays elevated. The Russian authorities declared that for the month of April—the first month where these elevated prices are really reflected—Russia earned $9 billion for its oil sales. That’s double the oil revenues that Russia had before the invasion.
RA: Fascinating. So that’s obviously the oil picture, but, more broadly, is it fair to say that Russia overall is benefiting from the conflict in Iran?
AG: There are three positive elements for Russia and one negative that is a silver lining for Ukraine. We discussed oil prices, and that’s the most important boost. It’s a big shot of adrenaline in the arm for Russian President Vladimir Putin’s economy and his war machine. Add to that the fertilizers, which are important; aluminum; and many other commodities that are affected by the war (and that your readers definitely know about, because Foreign Policy does a lot of coverage on these issues).
Second is the drawdown of Patriot interceptor missiles. By calculations from the first week of the war, the United States and its partners in the Gulf have used more Patriot interceptors than Ukraine has received from the United States and its allies since Russia’s full-scale invasion in 2022. The problem is that Patriot interceptors are the only efficient antidote against Russian ballistic missiles. Ukrainians know what to do about cruise missiles and drones. A shortage of Patriot missiles is the key vulnerability: Imagine if we go into a winter season, and Russians manage to build a big stash of ballistic missiles and unload them against Ukrainian infrastructure, big cities, and military facilities—that will be trouble.
Finally, the United States is distracted, consumed by another war for which there is no clear outcome for now. The Strait of Hormuz remains closed. This is a drag on the attention span of the U.S. national security establishment that could be spent on building leverage for Ukraine or working together with European partners. I may sound aspirational, but we’ve seen the Trump administration making some moves on sanctions against Russia’s largest oil companies. That was really helpful. We could have seen more of that had they not been dealing with the war. So these are the three positive elements.
One negative element for Russia—the silver lining I mentioned—is not of America’s making, but of Kyiv’s. Ukrainian President Volodymyr Zelensky and his team jumped immediately on the opportunity to tap into this new demand for interceptors against Iranian drones that countries in the Gulf have been exposed to. It turned out that the United States doesn’t have really efficient air defenses against them, whereas Ukrainians have been living through attacks of Shahed drones for more than three years, and they know how to combat them. They have indigenous solutions, and they need money and industrial capacity to scale them up. So, team Zelensky has dispatched operators who are training local militaries on how to deal with those threats. They’re also discussing joint ventures and investment from rich Gulf countries into the production of these interceptors. So, hopefully, that will give the Ukrainian defense industry a much-needed boost.
RA: Is Russia actively helping Iran in any way? I think there’s some new reporting that Russia is shipping drone components to Iran via the Caspian Sea, and then Iran gets 2 million tons of Russian wheat that used to go through the Black Sea, which is also going through the Caspian now. What’s your sense of how strong that relationship is right now and whether, given everything you’ve been saying about how the conflict in the Middle East is helping Putin, that’s making him want to double down on helping Iran?
AG: The data set that we are operating upon is patchy at this point. We rely a lot on the revelations of Western intelligence agencies, through the media and the tremendous job that the journalists are doing, but the statistics don’t give you a very clear picture at this point. Russia is not Iran’s treaty ally. It doesn’t have an obligation to come to Iran’s defense. The much-hyped strategic cooperation treaty is really not a military alliance and doesn’t give Iran the type of Article 5 guarantee.
However, Russia is happy to help Iran with its limited means. The bandwidth is not necessarily there to make a big difference, because the Iranian air defense bubble was popped during the previous war last June. So there was very limited time to deliver the systems that Iran would need to restore its air defenses. By the way, Russia needs its air defense, too, because it’s standing up to a very potent opponent—Ukraine—that strikes a lot of targets inside Russia, including industrial and military sites that are thousands of kilometers away from Ukrainian territory.
So, what Russia could have done for Iran is limited. But we know that Russia is sharing targeting data used to locate American assets and strike them in the region, and that Russia is sharing the drone components that you mentioned, Ravi. Iran provided Russia with Shahed drone technology first, and then Russia went into deep modernization. So, the drones that the Russians are using are still the original Shaheds, but they’ve made many improvements, and they’re happy to give this technology back to Iran to go after its opponent.
And then there are all the softer elements that Iran definitely needs, because the closure of Hormuz affects Iran negatively. It needs to import a lot of things, and the Caspian Sea is the logical way, so Russia is one of the lifelines that the Iranian regime is using to keep afloat. Why is Russia doing that? The organizing principle of Russia’s foreign policy is to support the war against Ukraine. In every relationship, Russia is seeking help for its battlefield needs, help to generate cash flow for the war economy, and a tool to avenge massive Western help to Ukraine. In Iran, Russia definitely finds help for its battlefield needs via Shahed drones and other elements. And it’s now a tool to pay back this debt in blood to Americans who have been helping Ukrainian defenders massively with intelligence provisions.
RA: As you were describing some of the threats that Russia faces on its soil from Ukraine, I was reminded of Russia’s Victory Day parade just this past weekend. It was surprisingly muted. Tanks and military vehicles didn’t go through the Red Square this year out of fear of Ukrainian attacks. The Kremlin also shut off mobile internet in the area in the days leading up to it. I have to ask, is Putin in a bad place right now?
AG: This parade exposes that Russia is facing mounting problems in guaranteeing the security of its military and production assets, particularly oil and gas refineries and export terminals, which generate cash for the war machine. It’s also facing the risk of Ukrainian long-range attacks on the capital. We’ve seen a spectacular intelligence operation, Operation Spider’s Web, where Ukrainians used state-of-the-art drones in order to strike Russian strategic bombers that were carrying missiles hitting Ukrainian cities. Amid this amount of threats, Putin has reasons to be worried. And the scaled-back version of the parade that you mentioned is a clear demonstration of that.
And, by the way, Russia really needed Trump’s intervention at the very last moment to broker a cease-fire and to have a certain guarantee from Trump that Ukrainians will not attack the parade. Kyiv played it brilliantly in the public relations domain because it has shown that it has these capabilities to strike Russia. It can hold Moscow at risk. It can force Moscow to pull back all of these air defense assets to protect the parade, Putin, and the capital—and it’s not enough. So, they have to shut down mobile internet, causing a lot of anger. At the very end, it takes Trump to guarantee to Putin that Zelensky will not try to strike his parade. And then Zelensky issued a very funny executive order, saying, “I hereby order that the parade in the city of Moscow (Russian Federation) be permitted.” The Russian state was really at a loss for words. It was deeply, deeply embarrassing.
RA: I can imagine.
Let’s talk more directly about the state of play in the war now—Russia’s war in Ukraine and not the other war we’ve been discussing so far. It seems like Russia actually lost some territory to Ukraine in the last few weeks, and it is now losing more personnel each month than it can recruit. What’s your sense of the state of play on the ground?
AG: I would dispute the data. DeepState, the most respected public research that is done by Ukrainian volunteers, shows that Russia is actually gaining ground. They are losing ground in some areas but gaining more ground in other areas, and the jury is out about how much ground they will be able to capture. I think that the trajectory of the war may look exactly like 2024 and 2025 on the front lines. That means Russia maintains a huge manpower advantage; it has more tanks, it has more artillery pieces, it prints more artillery shells, it has more missiles, it has more fighter jets. This numerical superiority is there, and Russia is gaining territory.
However, this gradual advance is coming at a very steep cost in materiel and personnel. What’s most important is that it doesn’t lead Russia any closer to its strategic goals, which is capturing all of Ukraine; or imposing a government that Russia could be satisfied with in Kyiv; or imposing the conditions for Ukraine to break its military-industrial and intelligence-sharing ties with the West. So, Russia is not anywhere closer to reaching these strategic goals, although it’s getting chunks of Ukrainian territory at high cost and wearing Ukraine down.
For the time being, it looks like Ukraine has managed to address its vulnerabilities through technology, through Western and mostly European industrial help, and through its strategy of trading territory gradually for colossal losses on the Russian side. The point where the war turns into negative returns for the Kremlin is probably already there.
The caveat to that is: Does Putin get the message? Or is he still optimistic about the trajectory of this war because his generals are telling him, “Give us another six months. Give us another year. Ukraine is Germany in 1917. It’s on its last legs, and it seems that it’s still standing, but we just need the decisive push and it will fall”? And if he’s lulled into that, if he is not operating with good intelligence and actual information on what’s happening on the battlefield, he may continue. Unfortunately, despite all of the Ukrainian demonstration of tenacity and resilience, the Russians still have resources to continue this deadly course of action.
For the full discussion, don’t forget to look at the video box atop this page, or download the FP Live podcast.
