The key pillar of Russia's war chest is cracking. The timing couldn't be worse.

Russia’s revenue from oil and gas has plunged recently, putting further pressure on Moscow to end its war in Ukraine.

In July, Russian President Vladimir Putin’s administration collected 787.3 billion rubles, or $9.8 billion, from oil and gas revenue — 27% lower than a year ago, according to the country’s finance ministry on Tuesday.

The decline in energy tax revenue further strains Russia’s budget, which posted a deficit of 3.7 trillion rubles, or 1.7% of GDP, in the first half of the year. Oil and gas remain vital to Russia’s economy and to funding its war, now in its fourth year.

That funding is now under threat on multiple fronts.

Last month, the European Union unveiled its 18th sanctions package against Russia. It replaced the fixed $60-per-barrel cap on Russian oil with a more flexible mechanism that limits prices to 15% below global market averages, effectively slashing Moscow’s revenue on each exported barrel.

But the pressure isn’t just coming from Europe.

Trump targets India over Russian oil

Recently, Trump has sharpened his rhetoric — and trade threats — against countries buying Russian oil, singling out India, a top buyer of the fuel.

Last week, Trump announced a 25% tariff on Indian goods and a “penalty” for its purchases of Russian oil.

On Tuesday, the American president said he could hike that rate.

“I think I’m going to raise that very substantially over the next 24 hours because they’re buying Russian oil, they’re fueling the war machine,” Trump told CNBC in a phone interview.

India’s external affairs ministry pushed back, saying on Monday that its energy imports are focused on ensuring “predictable and affordable energy costs” for Indian consumers.

Trump said last week that he wants a deal to end Russia’s war with Ukraine by August 8.

“Putin will stop killing people if you get energy down another $10 a barrel. He’s going to have no choice because his economy stinks,” Trump told CNBC on Tuesday.

India could make a deal for trade relief

While most analysts believe India is unlikely to drastically reduce its Russian oil intake, some say it could be used as a bargaining chip in trade negotiations with Washington.

“Some reduction in Russian oil imports as part of a grand bargain is not outlandish, given that Russian crude share of total crude imports has surged from being negligible to ~38% since 2022,” wrote Vishnu Varathan, Mizuho’s head of macro research for Asia, excluding Japan.

Varathan cited the “dire threat of unrelenting US geo-economic pressures” as a key factor in why Delhi could reduce dependency on Russian oil as part of a trade deal with Trump.

Crude oil futures gained on Wednesday following Trump’s latest tariff threats, with US crude oil futures trading 0.6% higher at $65.56 a barrel at 1:36 a.m. ET.

Still, prices are down about 9% year to date, with global supply remaining strong as OPEC ramps up output. Demand from China, a major importer, is also weak amid a prolonged economic slowdown.

Analysts at ING said the market could absorb modest price increases if India cuts Russian oil imports and shifts to other suppliers. But they warned broader pullbacks could be disruptive.

“If India were to stop buying Russian oil amid tariff threats, we believe the market would be able to cope with the loss of this supply,” wrote commodities strategists at ING in a Wednesday note.

However, the bigger risk is if other major Russian oil buyers also start to avoid buying the commodity.

“This would require OPEC to tap into its spare production capacity quickly and aggressively to balance the market. This could result in significant further upside for prices,” they wrote.