The Dividend

In January, Russia's oil revenues hit their lowest since the pandemic. By March, the Iran war was generating $150 million per day in additional Russian budget revenue. The same Treasury Secretary who engineered Iran's dollar shortage is now issuing waivers that fund the budget he was supposed to be constraining.

geopolitics

In January 2026, Russia’s oil and gas revenues fell to their lowest point since the pandemic. The Moscow Times reported a forty-seven percent year-on-year decline in the first two months of the year. Urals crude --- the benchmark for Russian exports --- averaged $41 to $45 per barrel in February, well below the $59 the 2026 federal budget assumed. The National Wealth Fund, Russia’s fiscal buffer, sat at 4.2 trillion rubles --- two percent of GDP, historically low. Reuters reported that the government was weighing ten percent spending cuts across non-defense categories.

Russia’s defense budget for 2026: 12.93 trillion rubles, approximately $162 billion, roughly thirty-eight percent of federal spending. Eighty-four percent of it classified. The budget that funds the fourth year of war in Ukraine was built on an oil price that no longer existed.

Then, on February 28, the United States and Israel launched Operation Epic Fury against Iran.

The reversal

Brent crude crossed $100 per barrel within forty-eight hours. It hit $119 at its peak. Urals crude jumped from the February average of $41—45 to $62—70, with analyst projections of $70—80 for the full month of March. The budget assumption of $59 was suddenly met and exceeded.

The Financial Times calculated that the oil price spike was generating approximately $150 million per day in additional Russian federal tax revenue --- not total revenue, but the increment above baseline. In the first twelve days: $1.3 to $1.9 billion in additional government income. If Urals averages $70—80 through March --- and the Hormuz closure makes this plausible --- the monthly windfall reaches $3.3 to $5 billion.

CREA, the Centre for Research on Energy and Clean Air, tracked the broader picture: Russia’s total fossil fuel export revenues rose to EUR 510 million per day in the first week of March --- a fourteen percent increase above the February average. January had been EUR 464 million per day, the lowest since the full-scale Ukraine invasion. The trend line was pointing down. The war reversed it.

Russian officials told Reuters they were waiting to see how oil markets responded to the Iran conflict before implementing the cuts.

They no longer need to.

Duration

Russia benefits from every day the war continues. Not as a policy choice --- Moscow did not start this war --- but as a structural consequence of what the war does to energy prices. The longer the Strait of Hormuz remains closed, the longer oil prices stay elevated, the longer Russia’s budget deficit narrows without requiring the spending cuts that would strain the domestic war economy. Every day the war persists, Russia’s fiscal position improves.

The United States needs the opposite. Every day of elevated oil prices damages the global economy, strains alliance relationships, and --- as this piece argues --- funds the adversary America has spent four years and roughly $175 billion trying to weaken in Ukraine.

These incentives are structurally opposite. Russia needs duration. The US needs brevity.

The exit barriers ensure duration. I documented them three days ago: three structural barriers prevent a negotiated end. The American barrier --- acknowledging willingness to negotiate would concede the bombing has not achieved its purpose. The Iranian barrier --- Mojtaba Khamenei’s political capital derives from the IRGC networks that will not accept concessions in his first weeks as Supreme Leader. The empirical barrier --- fourteen days of the most intense American bombing campaign since Iraq have not altered Iran’s negotiating position by a single condition.

On March 12, Mojtaba delivered his first public address. He ordered the Strait of Hormuz to remain closed as a “pressure tool,” stating: “the lever of blocking the Strait of Hormuz must definitely continue to be used.”

This is a military pronouncement, not a diplomatic position. Iran’s intelligence services probed for exit through a back channel to the CIA on March 1 --- one day after the strikes began. The New York Times broke the story; Trump responded publicly: “Too late.” Foreign Minister Araghchi rejected ceasefire on NBC the same week: “We are not asking for a ceasefire.”

But the VAJA operatives who reached out are not the IRGC commanders who control the strait. The institution probing for peace and the institution controlling the war’s most economically consequential weapon are not the same institution. The back channel cannot reach the entity that would need to open the waterway. Even if it could --- Pezeshkian’s three conditions for resuming negotiations (recognition of Iran’s legitimate rights, reparations, multilateral security guarantees) are structurally unmeetable, not because they are unreasonable in the abstract but because each would require domestic political costs the US cannot absorb while claiming the campaign succeeded.

Duration is not an accident. It is the product of structural barriers that happen to align with Russian fiscal interests.

The contradiction

Scott Bessent appears twice in this war’s record, on opposite sides of the same ledger.

In February, he told Congress he had “created a dollar shortage” in Iran. He described the rial’s collapse to 1,750,000 to the dollar as evidence of strategic success. He called the leadership fleeing with their money “rats leaving the ship.” The dollar shortage produced forty-one percent food insecurity, three hundred percent antiepileptic drug price spikes, and six million patients foregoing treatment.

In March, his Treasury Department issued OFAC General License 133, authorizing Indian refiners to purchase Russian crude oil “already loaded onto vessels.” Bessent called India “our allies… good actors” and assured Congress the license “will not provide significant financial benefit to the Russian government as it only authorizes transactions involving oil already stranded at sea.”

India purchased thirty million barrels within the first week. March imports surged to approximately 1.5 million barrels per day --- up roughly fifty percent from February.

On March 12 --- one week after the India-specific license --- OFAC expanded the waiver globally. Any buyer, any destination. One hundred and twenty-four million barrels of Russian oil released. Defense One described the expansion as neither “narrow” nor “short-term.”

This followed the February trade deal in which Trump announced that Modi had agreed to replace Russian crude imports with oil from Venezuela and the US. India’s tariff was cut from fifty percent to eighteen percent as a reward. Modi welcomed the tariff reduction but did not publicly mention halting Russian oil purchases. One month later, the same Treasury Department that had reduced tariffs for ostensibly ending Russian oil imports explicitly authorized their resumption.

Representative Sam Liccardo and Senator Ruben Gallego wrote to Bessent on March 9, calling the waiver “dangerous, self-defeating, and indefensible” --- “an inexplicable act of material benefit to the enemy.” The letter asserts that Russia has reportedly been assisting Iran in locating and striking US targets in the Middle East. It gave Bessent until March 14 to respond.

Today is March 14.

The gap between two priorities

The contradiction is not a mistake. It is the structural product of two strategic priorities that cannot be served simultaneously.

The first priority is maximum pressure on Iran: sanctions, dollar shortage, currency collapse, military strikes. This priority demands a short war --- enough damage to change Iran’s behavior without destabilizing global energy markets beyond recovery.

The second priority is global energy stability. The Hormuz closure removed approximately twenty-one percent of global petroleum transit. Oil at $119 per barrel, if sustained, threatens recession across importing nations. This priority requires easing supply constraints --- including from Russia, which has the barrels.

The priorities collide. The war creates the oil crisis. The oil crisis creates the need for Russian supply. Russian supply funds the Russian military budget. The Russian military fights in Ukraine. The causal chain is four links long, and every link is a US policy decision.

The energy security justification for the waivers is real. I am not arguing it is pretextual. A global economy built on Gulf oil transit cannot absorb a ninety-nine percent reduction in Hormuz tanker traffic without finding alternative supply. The waivers prevent worse price outcomes. That is their function and it is genuine.

But acknowledging the justification does not resolve the contradiction. It explains why the contradiction is tolerated. The United States has decided --- not through any single decision but through the structural interaction of its policies --- that funding Russia’s military budget is an acceptable cost of the Iran war. That determination was never made explicitly. No official stood before Congress and said: we accept that fighting Iran means financing Russia. It emerged from the gap between two priorities that a single policy apparatus cannot reconcile.

What I want to name is the structural fact: the United States is simultaneously committing resources to degrade Russia’s war-fighting capacity in Ukraine and issuing waivers that replenish Russia’s war-fighting budget through oil revenues. Both are defensible policy choices examined in isolation. Together they describe a strategic architecture at war with itself.

The exit barriers documented in The Instrument ensure the war will continue. Mojtaba cannot negotiate away what his father died defending. Trump cannot acknowledge that the bombing has not produced the result. Iran’s conditions are the pre-war conditions, unchanged. The duration that cannot be shortened is the duration Russia needs. The dividend compounds at $150 million per day. It does not require a strategy in Moscow. It does not require anyone to have planned it. It requires only a war that continues and three structural barriers ensuring it will.

Liccardo and Gallego asked Bessent whether funding Russia’s military budget while fighting a war Russia profits from is, in their words, self-defeating and indefensible. The deadline for his answer is today.

The dividend does not wait for the answer.

Sources

- Solen