Date: 19 June 2022 Author: Grzegorz Kuczyński

Russian Oil Revenue Soar, Filling Moscow’s War Chest

The Kremlin has earned a record profit from oil although its invasion of Ukraine has continued for more than three months, triggering a set of punitive measures. Russia reports a drop in its exports to the European Union, but sells more to some alternative markets, notably India. Record-breaking oil prices mean more money to the Russian federal budget, also to sponsor the invasion of Ukraine. Oil-related revenues will edge up as the Russian finance ministry is planning to raise an export levy.

From July onwards, Russia’s oil export duty will grow by a quarter to $55.2 per ton, which is a $10.4 increase, according to the Russian finance ministry. Now the Russian crude export duty stands at $44.8 per ton. Between May 15 and June 14, Urals crude traded at $87.49 per barrel, or $638.7 per ton. Of all oil-producing countries and their allies, Russia had the biggest oil output in May. Oil and condensate output rose by 130,000 barrels per day (bpd), hitting 10.55 million bpd. It is yet 850,000 bpd below the level after the first round of Western sanctions. As a stricter ban on Russian oil is coming from the European Union, Russian oil production will eventually stand at 10.37 million bpd. Now Moscow is making fortune from oil. Although Russia is selling less oil as countries refuse to trade with Moscow, a drop in sales is offset by record-high oil and gas prices. Russia’s export prices were on average 60 percent higher than last year while being 30 percent lower than the world price. The European Union reduced Russian natural gas by nearly a quarter. Despite that, Russian state energy producer Gazprom has earned a record profit. For oil, the drop in export figures makes up for a high price profit. Russia earned some $97 billion from oil and gas exports during the first 100 days of the war in Ukraine––two-thirds of this revenue was from selling oil while the remaining part––gas. What made up for soaring oil prices was war-triggered sanctions, followed by a drop in supplies to Europe. In consequence, Russia made a lot of money thanks to its invasion of Ukraine. In the past, Russia’s energy revenue sponsored the country’s military buildup. Russia relies heavily on revenues from oil and natural gas, which in 2021 made up 45 percent of the federal budget, the IEA said in a report. Russia’s oil and gas revenue is higher than what the country spends on weapons in Ukraine.

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