Russia's oil and gas revenues fell by almost a quarter last year - Bloomberg
Kyiv • UNN
Russian revenues from oil and gas taxes decreased by 24% year-on-year
Russia's budget deficit widened more than expected last year as oil and gas revenues fell by almost a quarter and the Kremlin increased spending amid the war in Ukraine, Bloomberg reports, UNN writes.
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Russia's budget deficit has reportedly reached 3.2 trillion rubles ($36.1 billion), or 1.9% of GDP, according to the Finance Ministry. This is 300 billion rubles more than both the budget plan and the estimate of Russian Finance Minister Anton Siluanov made in late December.
The deficit reportedly widened as spending exceeded forecasts by 11%. According to the Finance Ministry, oil and gas taxes - a key source of funding for the Kremlin's invasion of Ukraine - fell by 24% y-o-y, but still accounted for almost a third of total Russian budget revenues last year.
"The flow of petrodollars has been on the decline as prices for Russian barrels have fallen amid a slump in the global crude oil market and tighter Western energy sanctions. Official data show that a sharp decline in Russian pipeline gas exports and generous government subsidies to the country's oil industry have exacerbated the decline in net revenues," the newspaper writes.
Declining state revenues from oil and gas are reportedly putting additional pressure on the budget, while Russia plans to increase military spending by almost 70% in 2024, as Russia's war against Ukraine approaches its third year. Social spending is also indicated to be higher, as Russian dictator Vladimir Putin prepares to run for a fifth term in the March elections.
According to the Ministry of Finance, the average price of Urals crude, Russia's main export oil, fell by more than 17% last year to $62.99 per barrel. This is still above the $60 per barrel price ceiling set by the Group of Seven countries and its allies at the end of 2022 in an attempt to limit the Kremlin's revenues. Although other countries can buy Russian barrels at a higher price, if they do not comply, they will not be able to access Western services such as shipping and insurance.
Since mid-October, the US Treasury Department has tightened control over compliance with the price ceiling by imposing sanctions on several tankers, their owners, and crude oil traders accused of violating the price ceiling. This increased the risks for buyers of Russian barrels, resulting in a discount of Urals crude oil relative to the benchmark Brent crude oil. According to the Russian Ministry of Finance, the gap reached almost $14 per barrel in December.
Although the current discounts are much smaller than the price gap of more than $30 per barrel seen immediately after the invasion of Ukraine, they are significantly higher than the historical average of about $2-3 per barrel, the publication notes.
According to the Russian Ministry of Finance, Russia's decision to cut off most of its gas supplies to Europe via the pipeline led to a decrease in budget revenues from gas export duties by more than 65% to 566 billion rubles last year. Currently, Russia supplies gas to the West through Ukraine and only one branch of the Turkish Stream pipeline through the Black Sea.
The annual decline in revenues from the gas production tax reached 35% last year, the publication writes.
Russia has not yet disclosed data on pipeline gas supplies for 2023. According to the International Energy Agency, pipeline gas exports to the European Union were down 65% year-on-year, amounting to only 20-25 billion cubic meters. Gas prices in Europe were less than half of the level seen in 2022 amid lower consumption and milder weather conditions, further reducing export revenues.
The Russian government also paid 2.9 trillion rubles in subsidies to the oil industry last year, which further reduced net revenue, according to the Ministry of Finance. For comparison, budget expenditures on healthcare and education combined amounted to 3.1 trillion rubles.
In an effort to increase revenues, the Russian government cut one of these subsidies to the oil industry in half in September. The move led to fuel shortages across Russia, forcing the cabinet to restore full subsidies and even impose a temporary ban on fuel exports to curb domestic prices, the newspaper writes.
