May 24, 2026: The Russian military has stumbled because of the costly Ukraine War. Military operations are costly and destroy wealth, considering the $30 billion the Americans have spent on the Iran war so far. The Russian economy depends on oil income to survive. At the same time the economy is crippled and collapsing. The current Russian GDP is $3 trillion and growth for this year is estimated to be 0.4 percent. The Ukraine War imposed enormous costs on the Russian economy, expenses that can no longer be sustained. The war led Russia to switch to a wartime economy. This distorted production, causing shortages for civilians and the manufacturing sector. Ukrainian attacks on Russian manufacturing and oil production and refining operations further disrupted the economy.

Before the Iranian economy was devastated by American and Israeli airstrikes in early 2026, Iran had become quite skilled at evading sanctions. Russia is also facing a financial crisis because its main export item, petroleum, has declined in value while Russia, because of sanctions, has more difficulty getting cut-rate petroleum to buyers. For example, in the second half of 2023, Russian oil income hit a record low of $14.4 billion while the control over oil prices of OPEC, the Organization of Petroleum Exporting Countries, had started to unravel after 64 years of controlling the oil market. A growing number of new oil exporters do not join OPEC. This further degrades OPEC’s ability to control oil prices and keep them high. While oil and natural gas prices have recently spiked due to closure of the Strait of Hormuz in the Iranian war, potential Russian export income from those have not increased because of recent significant Ukrainian air attacks on Russian refineries, export ports and oil/natural gas pipelines.

Economic sanctions imposed on Russia for invading Ukraine have also made it difficult for Russia to deliver oil to customers, so Russia then cut its oil prices. This made the illegal Russian oil imports attractive because it protected the importer against losses from sanctioned shipments that were detected and blocked by one or more of the many nations supporting the sanctions. At the same time OPEC has been losing its ability to control oil production because of the increasing number of new oil exporting nations that did not join OPEC and sell their oil on the open market for whatever they can get. This trend is overwhelming OPEC’s ability to control prices and reduces Russian oil income more each year.

This is all part of a growing assortment of economic problems imposed on Russia. Soon after Russia invaded Ukraine, Western countries united in imposing severe economic sanctions on Russia. This did some damage to the Russian economy, but not as much as the sanctioning countries expected. This is because there are always other countries with current or previous experience evading sanctions. Outlaw states tend to cooperate, or at least share sanction evasion techniques with each other. Russia found that nearby Iran, which has been under varying degrees of sanctions for decades, was a good source of advice on evading sanctions. Even before Russia went total outlaw in Ukraine, they had been cooperating with Iran, North Korea, and several other heavily sanctioned nations.

Russian oil exports, which for decades have been about eight million BPD/Barrels Per Day, vary in value depending on the world price for oil. In the last decade there have been two instances of sanction-related declines in Russian oil exports. The first was in 2014, in response to the Russian occupation of Crimea and parts of eastern Ukraine. Russian oil exports fell about ten percent from their normal level. Russian oil exports recovered quickly to their previous levels, but oil income remained lower because Russia had to use discounts to get past the oil sanctions. This was because nations caught obtaining sanctioned oil could themselves be sanctioned. In 2022, Russia was hit with even heavier sanctions that caused oil income for 2022 to decline by over 20 percent compared to the previous year.

Russian oil exports cannot be ignored because Russia is the second largest oil exporter, behind Saudi Arabia. During periods when Russian oil exports are sanctioned, the primary impact is Russia receiving less for its oil. Russia managed to quickly deal with the new sanctions because of its close relationships with Iran, which was a veteran practitioner of how best to evade sanctions.

Because Russian oil exports represented a larger portion of oil exports, Russia found more major oil purchasers willing to cooperate in evading sanctions for the discounted Russian oil. Iran was also a major supplier of munitions to Russia after Ukraine was invaded and Russia found it needed more ammunition than expected. Russia expected a short war. This is a common delusion with aggressor states and now Russia finds itself taking major losses in Ukraine and unable to find an easy way out.

In the end, the war in Ukraine bankrupted the Russian economy and Iran found itself in a similar situation after the Americans and Israel decided to attack Iran and end the threat to regional peace and stability Iran had created since the 1980s.