Higher oil prices are making Russia richer — but not helping its economy grow, Goldman says

• Soaring oil prices are making Russia richer, even under Western sanctions.
• High crude prices are boosting Russia's exports, government revenue, and cash inflows.
• However, labor shortages and weak productivity are keeping growth stuck below 1%.

Sanctions-hit Russia is raking in more money from high oil prices, but that doesn't mean its economy is about to take off, according to Goldman Sachs.

International benchmark Brent crude futures were trading around $92 a barrel late Tuesday — about 30% higher since the Iran war started. That's a boon to Russia, the world's third-largest oil producer and exporter after the US and Saudi Arabia.

Unlike many other oil exporters, Russia doesn't rely on the Strait of Hormuz for oil shipments. That has made the energy giant one of the few beneficiaries of the recent disruption to global oil markets.

The problem is that Russia's economy has little room to expand, limiting how much the oil windfall can translate into faster growth, Clemens Grafe, an economist at Goldman Sachs, wrote in a Tuesday note.

"Despite the weak growth and funding being available to boost the economy, we do not forecast a demand-driven acceleration," Grafe wrote.

Goldman expects Russia's economy to grow just 0.9% this year. That's a slowdown from the 1% and 4.3% growth recorded in 2024 and 2025, respectively.

Even so, the country's oil windfall is substantial.

Goldman estimates Russia's current-account surplus — a broad measure of trade and income flows with the rest of the world — will nearly double to 3.2% of GDP in 2026 from 1.7% in 2025.

Government finances are benefiting, too. Every $10 increase in Russia's oil export price adds roughly $21 billion in budget revenue, according to Grafe.

Yet the extra cash isn't translating into faster growth.

"There is no meaningful spare capacity in Russia," he wrote.

The labor market remains extremely tight, with unemployment near record lows. Productivity growth has weakened, while 2 million workers are no longer available because of military service, casualties, or emigration amid the war in Ukraine, Grafe estimates.

As a result, pumping more money into the economy is unlikely to produce significantly more goods and services. Instead, Russian policymakers are likely to view the oil windfall as more of an inflation risk than a growth opportunity.

"Higher energy prices will not remove the binding constraints on growth," Grafe wrote.

In April, Russian President Vladimir Putin rebuked top officials following the country's economic contraction earlier this year. He demanded proposals for "additional measures aimed at reviving ⁠growth."

In January, Putin ordered a "significant increase" this year in tax collection and compliance as the economy came to a standstill.