The U.S. Senate passed a sweeping new sanctions bill on Friday, August 7, targeting Moscow’s energy revenues in what could become the most consequential piece of Russia-related legislation since the war in Ukraine began. The bill, dubbed the “Lindsey O. Graham Sanctioning Russia and Iran Act of 2026,” authorizes tariffs of up to 100% on countries that continue importing Russian oil and gas (Al Jazeera).

A Bill Years in the Making

The legislation had been stalled for months, previously blocked by the Trump administration before securing White House approval in the days before its passage. Senator Lindsey Graham, working with a bipartisan group of colleagues, called the measure one that “will make a decisive impact that goes beyond what can be achieved on the battlefield,” according to Al Jazeera’s reporting on the Senate vote.

The bill’s scope extends well past Russia’s direct trading partners. Reporting from the Hindustan Times flagged that India risks new US tariffs over its continued purchases of discounted Russian crude, illustrating how the legislation is designed to pressure third-country buyers, not just Moscow directly (NewsNow aggregation).

Why Now: Russia’s Oil Windfall From the Iran War

The timing is notable. According to a mid-year assessment from the Kyiv School of Economics Institute, the Iran war has inadvertently boosted Russian oil export earnings, which climbed from an average of $10.4 billion per month in January–February to $21.5 billion in April and $20.8 billion in May as global energy prices spiked (KSE Institute).

That windfall has complicated Western sanctions strategy. The KSE Institute’s analysis notes that disruptions to global energy flows caused by the Iran war have prevented more transformative measures against Russian energy exports, even as the EU has continued layering on incremental sanctions packages — its 21st so far — targeting the shadow fleet and anti-circumvention structures.

The Domestic Squeeze Continues Regardless

Even with the oil windfall, Russia’s underlying fiscal position remains under strain. The Moscow Times reports that Russian authorities are hiking the value-added tax rate from 20% to 22% starting January 1, 2027, while lowering the mandatory VAT registration threshold from 60 million to 10 million rubles — a move that will sweep far more small businesses into the tax net (The Moscow Times).

Forbes contributor analysis from mid-July estimated Russia’s 2026 growth at just 0.4%, down from an already weak 1% in 2025, even as the economy remains dependent on fossil fuel revenues that bring in roughly €734 million a day (Forbes). The World Bank, meanwhile, projects a global oil supply surplus will push Brent crude down to around $60 a barrel on average in 2026 — the lowest in five years — which would sharply cut into the same export revenues the Iran war has temporarily inflated.

What the New Sanctions Regime Adds

Beyond the Senate bill, the UK’s Office of Trade Sanctions Implementation published fresh guidance on August 3 covering banknote trade restrictions with Russia and Belarus, part of a broader tightening across Western jurisdictions (Fieldfisher). China has also been drawn into the sanctions crossfire: on July 24, Beijing added 14 EU-based companies to its own export control list in retaliation for the EU’s designation of 14 Chinese and Hong Kong entities under its Russia sanctions package — a sign the sanctions fight is becoming a genuinely multipolar affair rather than a purely US-Russia dispute.

The Bottom Line

The Graham bill’s real test will come in implementation. Secondary tariffs on buyers like India and China carry significant diplomatic and economic risk for Washington itself, given how deeply intertwined those countries are with US trade and investment flows. Whether the administration follows through on the threatened 100% tariffs — or uses the legislation primarily as negotiating leverage — will shape both the endgame of the Ukraine war and the next chapter of global energy markets.

For Russia, the near-term picture is one of contradiction: elevated oil revenues from a war it isn’t party to, layered atop a domestic economy showing every sign of a prolonged, tax-funded slowdown.

What does the new US Russia sanctions bill do?

The Senate-passed “Lindsey O. Graham Sanctioning Russia and Iran Act of 2026” authorizes tariffs of up to 100% on countries, including India, that continue importing Russian oil, gas, and uranium, aiming to cut off Moscow’s energy revenues.

Russia’s economy entered 2026 in genuinely fragile shape. Growth is projected at just 0.4% for the year, worse than 2025’s 1% expansion, which itself narrowly avoided recession as oil prices fell below $73 a barrel and budget revenues from oil and gas halved by January 2026 (Forbes).

The Iran-war windfall

Then came an unexpected lifeline. When the Israeli-Iran conflict effectively closed the Strait of Hormuz, the Trump administration temporarily lifted sanctions on Russian-origin oil already in transit between March and June 2026 in an effort to hold down global prices (UK Parliament Research Briefing). Brent crude surged more than 55% at the peak of the Iran war, approaching $120 a barrel, and Russia’s fossil-fuel export revenues — earning roughly €734 million a day at the low point — rebounded sharply (Forbes). The Financial Times and The Economist both characterised the episode bluntly: Putin was raking in an estimated $150 million a day in extra revenue directly attributable to the war-driven price spike (UK Parliament Research Briefing).

Russia supplied approximately 300 million barrels of oil to international markets during the sanctions-waiver window, and some observers warn the episode risked entrenching new buyer dependencies on Russian crude even after the waivers expire (Atlantic Council).

The pushback: Congress moves on the toughest bill yet

That reprieve is now colliding with the most aggressive sanctions legislation of the war. The Senate voted 86-12 on 28 July 2026 to advance the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, which would impose tariffs of up to 500% on countries importing Russian oil, gas, LNG, petroleum products or coal, ban new US investment in Russia’s energy sector, and prohibit US energy exports to Russia within 30 days of enactment (OilPrice.com). The US Treasury has already moved unilaterally, sanctioning major producers including Gazprom Neft and Surgutneftegas along with more than 180 vessels tied to Russia’s shadow fleet (US Treasury).

The EU has kept pace, agreeing its 21st sanctions package on 23 July 2026, even as several member states reportedly sought carve-outs to protect domestic corporate interests — a sign that sanctions cohesion is beginning to strain three-plus years into the conflict (UK Parliament Research Briefing).

The China and India swing factor

Whether the new measures actually damage Russia’s economy depends heavily on Beijing and New Delhi. CEPA’s analysis is direct: financial workarounds exist, and the outcome hinges on whether China and India are willing to accept secondary-sanctions risk to keep buying discounted Russian crude (CEPA). If China holds firm and continues purchasing, Moscow’s dependence on Beijing deepens further; if enforcement against third countries is applied rigorously, the ruble and Russian budget face real pressure that could push the economy into recession alongside sustained high interest rates (CEPA).

Why the 2026 budget baseline may already be wrong

Notably, Russia’s own 2026 budget baseline assumed no further meaningful sanctions would materialise — an assumption the Graham bill’s Senate momentum directly undermines (CEPA). Fossil fuel taxation still accounted for roughly 24.5% of Russian federal budget revenue through the first three quarters of 2025, meaning any serious disruption to oil exports flows directly into Moscow’s fiscal capacity to sustain the war (Brookings).

While the Strait of Hormuz standoff has driven up costs for oil-importing economies worldwide, it has quietly handed Russia a financial lifeline. Russian oil export earnings rose from an average of $10.4 billion per month in January-February 2026 to $19.1 billion in March, $21.5 billion in April, and $20.8 billion in May, according to the Kyiv School of Economics Institute’s mid-year sanctions assessment. That is roughly a doubling of monthly oil revenue in the space of three months — driven not by any change in sanctions policy, but by the same regional energy shock rattling markets worldwide.

Why the windfall happened despite tightening sanctions

The KSE Institute’s assessment is explicit about the mechanism: serious disruptions to global energy flows caused by the Iran war have prevented more transformative measures against Russian energy exports, leaving the overall sanctions architecture largely unchanged even as policy continued to advance in other areas — continued targeting of Russia’s shadow fleet, anti-circumvention measures, and broader restrictions on financial and military-industrial infrastructure. In effect, elevated global oil prices tied to the Hormuz crisis have provided cover, both financially and diplomatically, for Russia to keep exporting near sanctioned levels while earning substantially more per barrel.

The reversal risk now on the table

This is precisely why the emerging Strait of Hormuz reopening deal matters as much for Moscow as it does for Washington and Tehran. The KSE Institute’s own framing lays out the fork in the road for the second half of 2026: a prolonged global oil crisis would continue to support Russian export and budget revenues, while a faster return of the global oil market to surplus would expose Russia more fully to lower oil revenues, continued stagnation, and mounting fiscal and financing pressures.

Given that US and regional officials described a Hormuz deal as being in its “final stage” this week, the windfall that has propped up Russian government finances since March may be nearing its end — right as Russia’s underlying fiscal position remains structurally weak.

The underlying fiscal picture the windfall has been masking

Strip out the temporary Iran-war boost, and Russia’s core fiscal trajectory looks considerably more strained. The World Bank projects global oil supply moving into surplus, pushing Brent crude from an average of $68 a barrel in 2025 to around $60 in 2026 — the lowest level in five years — a dynamic that would resume once Hormuz-related disruption clears, according to The Moscow Times. To shore up the budget against that backdrop, Russian authorities are raising the VAT rate from 20% to 22% starting January 2026 and lowering the mandatory VAT registration threshold for smaller businesses from 60 million to 10 million rubles — tax increases that fall disproportionately on smaller regional enterprises even as military spending continues to claim an outsized share of the federal budget.

Why sanctions enforcement now hinges on China and India

The KSE Institute assessment argues Russia’s growing economic and fiscal vulnerabilities create additional opportunities to intensify sanctions pressure, proposing new energy, financial, and export-control measures. But the practical effectiveness of any tightened sanctions regime continues to depend heavily on whether China and India are willing to accept the secondary-sanctions risk of continuing to buy discounted Russian crude, according to analysis from CEPA. If China holds firm as a buyer, Moscow’s economic dependence on Beijing deepens further; if enforcement against third-country buyers tightens, the ruble and federal budget would face renewed pressure, potentially pushing the economy toward recession alongside sustained high interest rates.

Key takeaways

• Russian monthly oil export earnings roughly doubled from $10.4 billion (Jan-Feb 2026) to over $20 billion (April-May 2026), driven by the Iran-Hormuz crisis.
• The energy shock has effectively shielded Russia from more transformative Western sanctions measures during this period.
• A Strait of Hormuz reopening deal, now described as in its “final stage,” threatens to remove this windfall just as global oil markets are separately expected to move into surplus.
• Russia is raising VAT from 20% to 22% and lowering the small-business VAT threshold to shore up its budget against underlying fiscal weakness.
• Future sanctions effectiveness depends heavily on whether China and India continue absorbing discounted Russian crude.

FAQ

Why did Russia’s oil revenue rise in 2026 despite sanctions? Global oil prices spiked due to the Iran-Strait of Hormuz conflict, and the resulting disruption limited the West’s ability to pursue more aggressive sanctions on Russian energy exports during that period.

Would a Strait of Hormuz deal hurt Russia’s economy? Potentially yes — it would likely bring oil prices back down toward the World Bank’s projected 2026 average of around $60/barrel, removing the windfall that has cushioned Russia’s budget since March.

What tax changes is Russia making in 2026? VAT is rising from 20% to 22%, and the mandatory VAT registration threshold for small businesses is being lowered from 60 million to 10 million rubles.