Russia Monitor is a review of the most important events related to Russian internal and external security, as well as its foreign policies.
Date: 9 June 2023 Author: Grzegorz Kuczyński
Russia Sees Decrease In Oil and Gas Revenue
In May 2023, Moscow’s crucial oil and gas revenues were lower by 33 percent compared to last year. The reason was lower prices amid Western sanctions and fewer gas supplies to Europe. Moscow is running low on windfall profits due to a spike in hydrocarbon prices shortly after the beginning of the Russian invasion of Ukraine.
Budget proceeds from oil and gas taxes plunged 36 percent from a year ago to 570.7 billion rubles ($7 billion), the Russian Finance Ministry said in a statement. Crude oil and oil products, which accounted for some 75 percent of Moscow’s total hydrocarbon revenues in May, saw a 31 percent drop, to 425.8 billion roubles, in budget proceeds for Moscow compared to a year ago based on calculations made by Bloomberg. Taxes from crude and petroleum products — which accounted for 33 percent of total federal revenues — fell amid Moscow’s expenses to wage the war in Ukraine. In the wake of the implementation of the G7’s price cap policy on Russian crude and the EU-wide ban on seaborne oil and petroleum products, Moscow’s oil revenues fell substantially. Natural gas tax revenues also fell 46 percent last month, compared to a year ago, while tax income from the collection of tariffs on natural gas exports shed 81 percent. In April, Reuters reported that Russia’s budget revenues from oil and gas had fallen by 64 percent year-on-year, and by 5.9 percent month-on-month due to higher subsidies to oil refineries. From January to March this year, the Treasury Department said the Russian federal government’s oil revenues had dropped over 40 percent, falling to 23 percent of the budget–down from 30–35 percent of the budget prior to launching the war on Ukraine. Immediately after the invasion, Russia received windfall profits on an oil price spike created by its war in Ukraine. Today, however, the price cap policy is taking that windfall off the table, which allows for low- and middle-income countries to purchase oil while at the same time making it increasingly challenging for Russia to finance its aggression. Russia’s federal budget recorded a $42 billion deficit in the first four months of the year amid soaring spending on the war in Ukraine, combined with falling energy revenues for war-time coffers.
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