Oil Prices Surge, But Russia's Profit Margins Shrink Amid Strong Ruble

Economic

Commodity

Summary:

Despite the rebound in global oil prices driven by Middle East tensions, Russia is seeing diminishing returns from crude exports as the strengthening ruble erodes earnings in local currency terms....

Oil Price Rally Fails to Deliver for Russian Exporters

Although Russia’s flagship Urals crude surpassed $60 per barrel on June 13—recovering nearly all of its early-2025 losses—the financial benefits for exporters are being significantly offset by an appreciating ruble. According to Argus Media data and Central Bank of Russia (CBR) figures, exporters currently receive only about 4,957 rubles per barrel in revenue, a nearly 30% decline compared to the beginning of the year, despite the higher nominal oil price in U.S. dollars.

This mismatch underscores the widening gap between Russia’s export revenues in foreign currency and its domestic fiscal expectations in ruble terms. While oil prices are rising, the ruble’s surge is absorbing much of that gain, reducing the effective earnings from external trade.

Currency Strength: A Domestic Headwind to Fiscal Stability

The key factor behind this erosion in profitability is the dramatic appreciation of the ruble. By mid-June, the ruble had gained nearly 23% against the U.S. dollar, strengthening to 78.72 RUB/USD. Unlike Saudi Arabia, whose riyal is pegged to the dollar, Russia’s floating exchange rate means global oil revenues are exposed to foreign exchange volatility. In practical terms, as the ruble strengthens, every dollar earned from oil exports converts into fewer rubles—undermining domestic budget inflows.

This development is especially problematic given Russia’s heavy dependence on hydrocarbon revenues, which account for roughly one-third of total government income. While most state expenditures are denominated in rubles, the majority of oil revenues are earned in dollars or euros. The appreciation of the ruble, therefore, results in a real-term decline in fiscal resources.

Rising Budget Pressure and Fiscal Strain

Russia’s fiscal landscape is already under significant stress due to soaring defense spending amid ongoing geopolitical conflicts. The Ministry of Finance has acknowledged the possibility of a budget deficit up to three times larger than previously forecast for 2025. The erosion in ruble-denominated oil revenues only deepens this imbalance.

Although the government provides subsidies to partially offset export losses for domestic oil producers, Deputy Prime Minister Alexander Novak conceded that a strong ruble complicates operations across the sector. Igor Sechin, CEO of Rosneft—Russia’s largest oil exporter—was more direct, criticizing the Central Bank for overlooking the impact of its monetary policy on the real economy, particularly on energy firms.

Ruble Outlook Remains Firm For Now

Despite complaints from industry leaders, analysts see little prospect of the ruble weakening sharply in the short term. Freedom Finance Global’s report attributes the ruble’s strength to high interest rates and resilient commodity exports, which continue to draw capital inflows and support the currency. Unless oil prices collapse or inflation rises uncontrollably, the ruble is expected to remain in the 78–85 RUB/USD range, far from the 90–100 range that might relieve some pressure on exporters.

This sustained strength in the ruble reflects a causal link between tight monetary policy, stable commodity exports, and currency performance. However, the same relationship introduces a disconnect between external trade strength and domestic fiscal flexibility, especially when defense and infrastructure spending rise in tandem.

Russia's energy sector, though benefiting from rising global oil prices, is caught in a bind. The stronger ruble is diminishing export earnings in ruble terms, complicating fiscal planning and straining the government’s ability to fund rising domestic expenditures. Unless there is a major policy shift—either in monetary settings or fiscal allocations—Russia may continue to experience the paradox of high oil prices but thin profits, a scenario driven more by internal macroeconomic dynamics than external market success.

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Political

Escalating Border Tensions Lead to Permanent Closure

In a decisive response to Thailand’s unilateral actions, Cambodian Prime Minister Hun Manet has ordered the permanent closure of the Choub Korki and Choam border checkpoints in Udor Meanchey province. The announcement, made early on June 22, followed a report that the Thai Royal Army’s 2nd Military Region had independently shut down the Choub Korki crossing without prior notice or consultation with Cambodian authorities.

According to the Prime Minister, the Thai military’s pattern of closing border points since June 7 has increasingly disrupted cross-border mobility and livelihood activities. While Cambodia had previously maintained an open stance toward facilitating border access for both nations’ citizens, Hun Manet stated that any continued use of pressure tactics by the Thai military would be met with proportionate countermeasures.

Concerns Over Thai Institutional Disunity

What makes this incident more complex is Cambodia’s concern about apparent inconsistencies between the Thai political leadership and its military. Hun Manet expressed confusion over contradictory signals from Thailand: political leaders, including Prime Minister Paetongtarn Shinawatra, have reportedly advocated for bilateral dialogue and reopening of border gates, while the military has independently continued closures.

This lack of coordination has prompted Cambodian officials to question whether the military’s actions are part of a broader strategic approach or reflect internal discord within Thailand. In contrast, Hun Manet emphasized that Cambodia’s governance structure is unified—from the central government down to military forces—ensuring clear and consistent policy execution.

Cambodia Refuses Further Negotiation but Offers a Clear Path Forward

While ruling out negotiations for reopening the crossings, Prime Minister Hun Manet proposed a direct and conditional resolution: if Thailand unilaterally reopens the gates to their previous status before June 7, Cambodia would reciprocate within five hours. He emphasized that no negotiation is needed—only goodwill and sincerity from the Thai side.

This stance reflects Cambodia’s effort to assert sovereignty and policy clarity, while simultaneously signaling openness to normalized cross-border exchanges—provided that mutual respect is observed. By reinforcing a rules-based and coordinated approach, Cambodia is challenging what it perceives as arbitrary and disruptive behavior from its neighbor’s military apparatus.

The closure of the Choub Korki and Choam checkpoints marks a new phase in Cambodia–Thailand border dynamics, one that underscores both the fragility of military-dominated decisions and the importance of cohesive state diplomacy. If unaddressed, this impasse could strain broader bilateral relations and economic interdependence, particularly in border trade and labor flows. The coming days will test whether Thailand’s political leadership can align with its military and restore coordination—or whether tensions will solidify into long-term division.

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Commodity

Economic

Putin Signals Strategic Alignment with OPEC

During a high-profile meeting on the sidelines of SPIEF, Russian President Vladimir Putin reaffirmed Moscow’s enduring commitment to OPEC. Speaking directly to OPEC Secretary General Haitham Al Ghais, Putin underlined Russia’s intention to sustain energy dialogue and policy coordination in the face of global market volatility.

The conversation reflected more than diplomatic courtesy—it underscored a strategic continuity in Russia’s energy diplomacy. Putin’s expression of satisfaction at the bilateral engagement suggested Russia views its partnership with OPEC as essential to stabilizing the oil market and asserting its influence in global energy governance. This tone of strategic alignment is particularly significant as energy markets navigate a period of instability driven by geopolitical tensions and supply uncertainties.

Bilateral Invitations Reflect Mutual Commitment

Putin welcomed OPEC’s invitation for Russian Deputy Prime Minister Alexander Novak to visit Vienna, while extending a reciprocal invitation to Al Ghais to attend the Russian Energy Week in Moscow this October. These diplomatic gestures point to a sustained effort to institutionalize cooperation mechanisms beyond ad-hoc policy responses.

This reciprocal diplomacy reflects a growing interdependence: while Russia is not an OPEC member, its influence through the OPEC+ mechanism has been critical in executing coordinated oil production decisions that influence global prices. These visits are symbolic but also functional—serving as platforms for synchronizing strategic planning, especially as both sides confront fragile demand forecasts and shifting geopolitical dynamics.

Energy Market Challenges Call for Cohesion

Putin’s remarks during the forum did not shy away from acknowledging the pressing challenges facing the global energy market. His reference to a “difficult global phase” in energy underscores the complexity of maintaining market balance in the wake of ongoing conflicts, trade fragmentation, and the accelerating green transition.

Russia’s willingness to uphold coordinated production cuts—even as it contends with sanctions and restricted market access—indicates that aligning with OPEC remains both economically and diplomatically advantageous. The causal link between cooperative output strategies and oil price stabilization is central to Russia’s energy calculus.

Geopolitical Context Reinforces Need for Strategic Dialogue

Amid heightened uncertainty following the U.S. military strikes on Iran and growing speculation of potential oil supply disruptions, Russia’s emphasis on strategic energy diplomacy with OPEC takes on additional weight. It signals to markets that despite geopolitical fragmentation, major producers are maintaining channels for coordination and response.

Moreover, this stance serves to position Russia as a predictable actor in the energy domain—one that is not only seeking bilateral gains but also aiming to influence the global regulatory environment of energy flows. The political value of appearing as a stabilizing force cannot be overlooked, particularly when volatility in oil prices risks feeding into broader macroeconomic instability.

The reaffirmation of long-term cooperation between Russia and OPEC, framed within the SPIEF context, is a deliberate move to preserve influence, build resilience, and manage uncertainty. As global energy markets stand at a crossroads—pressured by conflict, transition, and economic fragmentation—Russia is doubling down on its alliances with fellow producers to shape the post-crisis energy order. Whether this collaboration will effectively mitigate volatility will depend on the consistency of policy execution and the ability to navigate diverging national interests under a unified framework.

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Commodity

Middle East Situation

Investor Uncertainty Keeps Gold in Consolidation Mode

Gold prices remained subdued this week despite elevated geopolitical risks, as traders exercised caution ahead of key macroeconomic events. After opening at $3,369/oz, gold fluctuated within a narrow band between $3,340 and $3,374/oz, closing at $3,368.6/oz—almost flat for the week. This hesitancy reflects broader market indecision amid the ongoing Iran-Israel conflict and expectations surrounding upcoming U.S. Federal Reserve policy guidance.

In Vietnam, domestic gold prices showed similar volatility, briefly dipping from 120.5 million VND per tael to 119.6 million before rebounding to 120 million VND.

Fed Testimony Could Set the Tone for Dollar and Gold

A crucial driver for next week’s gold movement lies in two testimonies scheduled for Federal Reserve Chair Jerome Powell before congressional committees on Tuesday and Wednesday. These sessions will provide insights into the Fed’s evolving stance on interest rates, inflation, and economic resilience in the face of mounting global uncertainty.

Following the Fed’s June 12 decision to maintain its policy rate at 4.25–4.5%, Powell signaled a cautious outlook, noting that while the Fed still anticipates two rate cuts by the end of 2025, it prefers to wait for clearer data—especially amid ongoing tariff disputes. If Powell hints at a September rate cut, this could weaken the U.S. dollar, thereby lifting gold prices. Conversely, a reaffirmation of the Fed’s focus on controlling inflation would likely strengthen the dollar and place downward pressure on gold.

The relationship between Fed guidance and gold prices remains fundamentally tied to expectations of real interest rates and currency strength. Should the Fed strike a dovish tone, gold could benefit from renewed investment flows as a hedge against a weakening dollar.

Middle East Conflict Adds Inflationary Tail Risk

Another powerful influence on market sentiment is the Iran-Israel conflict. President Trump’s two-week ultimatum to Iran for diplomatic engagement tempers the immediacy of full-scale escalation, yet the risk remains that Iran could retaliate by closing the Strait of Hormuz—through which 20% of global oil shipments pass. This scenario would likely push oil prices significantly higher, intensify global inflation, and indirectly increase gold’s appeal as a hedge against both geopolitical and economic shocks.

The causal relationship between geopolitical risk and gold demand is amplified in periods of elevated inflation and market fragility. Any sign of direct U.S. military involvement against Iran may trigger a broad-based flight to safety, favoring gold over riskier assets.

Technical Outlook: Consolidation Phase with Key Levels in Play

From a technical perspective, gold remains in a consolidation phase. The Relative Strength Index (RSI) has stabilized, indicating a sideways trading pattern is likely to persist unless disrupted by a clear policy signal or geopolitical shock. Analysts expect prices to test lower support at $3,340/oz. If breached, further downside toward $3,308/oz and the critical support zone between $3,245–$3,293/oz becomes likely. On the upside, $3,452/oz remains a formidable resistance level.

This consolidation reflects the current equilibrium between inflationary pressures, monetary policy uncertainty, and safe-haven demand—all of which remain delicately balanced.

Long-Term Fundamentals Stay Bullish Amid Central Bank Demand

Despite short-term ambiguity, the longer-term trend for gold remains structurally supported. According to the World Gold Council, central banks accumulated a record 290 metric tons of gold in Q1 2025—the largest quarterly purchase on record. This follows years of aggressive buying by emerging markets such as China and India, driven by efforts to diversify away from the U.S. dollar.

The correlation between gold accumulation and dedollarization strategies signals a longer-term shift in global monetary reserves, which continues to underpin strategic demand for the metal.

In the coming week, gold’s trajectory will be shaped by the tone of Fed Chair Powell’s testimonies and evolving developments in the Middle East. While short-term price action may remain range-bound, underlying demand from central banks and inflation-sensitive investors provides robust support. Investors will watch closely not only for immediate signals on rate policy but also for broader indications of geopolitical risk that could redefine gold’s role as a global hedge in an increasingly fractured world economy.

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Commodity

Political

Oil Markets Brace for Shock as Geopolitical Tensions Explode

Global markets are on edge following the U.S. military’s precision airstrikes on Iranian nuclear sites, marking a dangerous new phase in Middle Eastern tensions. Investors and analysts anticipate an immediate and severe impact on crude oil prices, driven by fears of supply disruptions and regional retaliation.

Mark Spindel, Chief Investment Officer at Potomac River Capital in Washington, D.C., predicted markets would open with heightened volatility and panic buying in oil, pushing prices rapidly higher. Jamie Cox of Harris Financial Group echoed this sentiment, forecasting a sharp but temporary spike in oil prices before some stabilization returns, contingent on how the situation evolves.

Brent Crude Already on the Rise Amid Pre-Conflict Volatility

Even before the U.S. entered the conflict directly, crude oil markets were showing signs of strain. Brent futures had already climbed 18% since June 10, reaching $79.04 per barrel—a five-month high—on the back of Israeli airstrikes against Iran earlier in the month. This upward trend is now expected to accelerate.

Analysts at Oxford Economics had already modeled potential trajectories before the U.S. strike, warning of severe implications under a worst-case scenario. Should Iran halt oil production and block the Strait of Hormuz—a vital chokepoint through which roughly 20% of the world’s oil passes—Brent prices could surge to as high as $130 per barrel. This would create inflationary pressure globally, potentially pushing U.S. inflation rates to nearly 6% by year-end.

Economic Fragility Heightens Investor Sensitivity

The timing of this crisis intersects uncomfortably with ongoing economic strain. The global economy is still grappling with the effects of prolonged tariff tensions, monetary tightening, and recent disruptions in energy markets. Jack Ablin, CIO of Cresset Capital, emphasized that the new conflict layers additional risk onto an already fragile environment. Rising energy costs will likely erode consumer spending and increase inflationary pressures, especially in advanced economies.

In this setting, even a minor supply disruption could act as a significant economic shock. The sensitivity of the energy sector, combined with its central role in global production and logistics, means any regional instability directly affects inflation expectations, growth forecasts, and monetary policy trajectories.

Flight to Safety: Dollar, Gold, and Treasuries Gain Ground

Investor behavior is already shifting in anticipation of elevated risk. A sharp increase in demand for traditional safe-haven assets such as U.S. dollars, government bonds, and gold is expected. Markets are also preparing for potential equity sell-offs, particularly in sectors vulnerable to energy price volatility or geopolitical exposure.

Steve Sosnick, Chief Strategist at Interactive Brokers, noted that a negative equity market reaction is nearly inevitable, though the extent of the correction depends on Iran’s immediate response. A restrained retaliation could contain the fallout, whereas a broader military counterstrike may unleash market-wide dislocation.

With the U.S. now directly engaged in military actions against Iran, the global economy has entered a heightened risk environment. Oil price trajectories, inflation expectations, and investor sentiment will hinge on the next strategic moves from Tehran and Washington. The correlation between geopolitical shock and financial turbulence is intensifying, and unless diplomacy returns to the forefront, markets may soon find themselves grappling with a multi-layered crisis spanning energy, inflation, and investor confidence.

Source: OilPrice

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Political

Middle East Situation

UN Warns of Global Consequences Amid Sudden U.S. Assault

On June 21, following a swift and coordinated U.S. military operation targeting three of Iran’s strategic nuclear facilities, United Nations Secretary-General Antonio Guterres issued a stark condemnation, labeling the act as a "dangerous escalation" that risks destabilizing not only the Middle East but also the broader international order. The Secretary-General warned that the world stands "on the edge of losing control," emphasizing that further escalation would have "catastrophic consequences for civilians, the region, and global stability."

According to Guterres, the only viable path forward lies in diplomacy, not military confrontation. He urged all actors involved to refrain from actions that could deepen the crisis and push the region into chaos. His remarks came amid mounting concern that the long-standing tensions between Iran, the United States, and Israel may ignite a broader conflict involving multiple actors and domains.

U.S. Targets Iran's Nuclear Infrastructure in Precision Strike

The American military action, executed during the night of June 21 local time (early June 22 Vietnam time), involved 30 Tomahawk cruise missiles and six bunker-penetrating bombs. These advanced weapons systems struck Iran’s nuclear facilities in Fordow, Natanz, and Isfahan—locations considered vital to Iran’s alleged nuclear weapons development capabilities.

The Pentagon stated that the goal was to dismantle Tehran’s ability to advance its nuclear program. U.S. officials also stressed that Iran was notified prior to the strike, and that the military action was not aimed at regime change. This disclosure appears intended to temper international reaction and signal a limited scope of intent, yet the scale and symbolism of the attack indicate a highly escalated posture.

Iran’s Response and Legal Counteraction

Iran's Atomic Energy Organization (AEOI) condemned the attack as a blatant violation of international law. In a public broadcast, the agency stated that it has launched legal proceedings to defend the country’s sovereignty and national interests in response to what it calls unlawful aggression.

In a further sign of escalation, Iranian authorities declared that all U.S. citizens and military personnel within the region would henceforth be treated as legitimate targets. This statement sharply raised the security risk for American presence across the Middle East and sets the stage for potential retaliatory actions by Iran or its allied forces.

Assessing the Broader Implications

The U.S. strike, though justified by Washington as a preemptive non-proliferation measure, carries substantial geopolitical risk. The response from the UN underscores widespread concern that the rules-based international order is being severely tested. Guterres’ insistence on diplomatic resolution reflects a growing consensus among global institutions that continued reliance on force undermines prospects for sustainable peace.

Although the U.S. administration insists it does not seek regime change, the use of overwhelming military force to neutralize Iran’s nuclear potential introduces strategic ambiguity about Washington’s endgame. The correlation between military action and regional instability becomes increasingly evident as actors such as Iran shift from passive deterrence to active defense posturing.

The UN’s intervention highlights a pivotal moment for international diplomacy. With Iran signaling intent to retaliate and the U.S. reinforcing its strategic position, the potential for a wider conflict has risen sharply. Whether the situation escalates into full-scale war or retreats into negotiation will depend on whether international stakeholders—including Russia, China, and regional powers—can galvanize a coordinated response to reinstate dialogue. Without such a move, the world risks entering a cycle of retaliation with far-reaching consequences for global peace and security.

Source: France24

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Economic

Financial Stress Triggers State Asset Liquidation Plans

In a bid to ease budgetary constraints intensified by Western sanctions and wartime spending, the Russian government is reactivating its suspended privatization agenda. Finance Minister Anton Siluanov confirmed that Russia is considering selling stakes in major state-controlled enterprises across energy, transport, and finance sectors. Although specific companies were not named, historical context and analyst speculation point to long-standing privatization candidates such as Rosneft.

Siluanov emphasized the need for capital to fuel investment programs in key national corporations, which currently face mounting difficulties in securing adequate funding. By the end of 2023, the ministry plans to resubmit a list of 30 enterprises for partial privatization, asserting that the government would retain majority control. An earlier projection from March estimated that divesting shares in just seven major firms could yield up to 300 billion rubles (approximately USD 3.8 billion).

Historical Precedents and Structural Limits

Russia’s privatization efforts are not unprecedented. In 2016, a 19.5% stake in Rosneft was sold to Glencore and Qatar’s sovereign wealth fund. However, subsequent investigations revealed that the deal was primarily funded through Russian banks, allowing the state to preserve de facto control. This raises critical concerns about the legitimacy and transparency of any new privatization wave, especially when no substantial influx of foreign capital is involved.

Currently, Moscow's options are severely constrained. Foreign capital markets remain inaccessible due to sanctions, and domestic borrowing costs hover near 20%, placing severe strain on fiscal operations. Under these conditions, selling stakes in state-owned enterprises is emerging as one of the few viable mechanisms to raise liquidity.

Still, the Kremlin’s historical reluctance to fully relinquish control over strategic sectors like energy and banking underscores a key limitation. Even in earlier privatization attempts, political sensitivities and asset price volatility repeatedly caused delays and scope reductions.

Economic Indicators and Policy Signaling

The announcement coincides with the St. Petersburg International Economic Forum, suggesting a possible intent to use the announcement as a symbolic gesture to reassure markets and international observers. However, without genuine structural reform or significant external capital, such moves risk being perceived as cosmetic rather than transformative.

At the same forum, Economy Minister Maxim Reshetnikov offered a stark assessment: Russia is teetering on the edge of recession. Though official data has yet to confirm a downturn, Reshetnikov noted that forward-looking indicators—such as weakening business sentiment—suggest economic contraction is likely. The warning is particularly notable given that Russia’s recent GDP growth, over 4% in both 2022 and 2023, was largely driven by a surge in military spending, which rose 25% last year to 13.1 trillion rubles (USD 167 billion). This stimulus effect now appears to be waning.

Structural Vulnerabilities and Long-Term Outlook

The shift in tone from government officials indicates a growing awareness of the fragile economic foundation underpinning recent growth. While military expenditure can temporarily inflate GDP, it does not address the underlying productivity stagnation, investment shortfalls, and capital flight that continue to burden the Russian economy. The proposed privatization campaign, if pursued without transparent mechanisms and genuine capital inflow, may fail to achieve its fiscal objectives and could even undermine public confidence.

Overall, the causal relationship between constrained fiscal options and the asset sale plan is evident, while the correlation between state announcements and external investor sentiment raises further questions. If the privatization measures are perceived as rushed or superficial, their ability to stabilize Russia’s macroeconomic position will be severely limited.

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