April 3, 2025
Forced discounts on Russian oil due to the tightening of US sanctions and a sharp strengthening of the ruble have hit the budget’s raw material revenues.
In March, tax revenues from oil and gas fell by 17% year-on-year to 1.08 trillion rubles, the Finance Ministry reported on Thursday. In monetary terms, compared to March 2024, the treasury lost about 230 billion rubles in fees, which provide the government with every third ruble of income.
The Finance Ministry has recorded a reduction in raw material rent by almost 20% for the second month in a row, and in cumulative total — for January-March — oil and gas fees fell by 10% to 2.64 trillion rubles. “The situation is sensitive. These are significant losses that will need to be covered either by additional borrowing or by using the National Welfare Fund, which has a small amount left,” notes Sofia Donetsk, chief economist at T-Investments.
According to her estimates, the budget may lose up to 2 trillion rubles in oil and gas taxes per year, or about 18% of the planned amount (10.9 trillion rubles). Oil prices and the ruble exchange rate are becoming a headache for the government: a barrel of Urals costs less than $60, although $70 was included in the budget. At the same time, the dollar exchange rate fell to 84 rubles, instead of 96.5 rubles according to the government’s plan.
As a result, the ruble price of oil, a critical parameter for the budget, fell to its minimum since the summer of 2023 and is almost 30% short of the government’s projections. “A strong ruble is a joy for Russians, but a pain for the budget. After all, we receive oil and gas revenues in foreign currency, and then they are converted into rubles. The stronger the ruble, the fewer rubles exporters receive at the output,” recalls investment banker and professor at the Higher School of Economics Evgeny Kogan.
To patch the hole in the budget, which in January-February exceeded the annual plan three times, the government will probably have to devalue the ruble. It is currently overvalued by 20%, and gradually, by the end of the year, the rate will return to 100-105 rubles per dollar, Donetsk believes.
The authorities are running out of reserves to cover lost revenue. The National Welfare Fund, which had been accumulating for years using excess revenues from raw materials, has lost two-thirds of its liquid assets in three years of war: the fund has just under $40 billion in free money, the lowest since its creation in 2008. The NWF reserves will last a year if Urals oil stays above $50, according to Olga Belenkaya, an economist at Finam. “It’s important how much prices fall and how long they stay low,” she emphasizes. With oil below $50, the Finance Ministry will have to start budget sequestration, that is, cut certain expenditure items, MMI analysts warned.
As usual, these “facts” and figures must be taken with a pinch of salt. Better make that a pound. If the roaches say their oil and gas revenues fell by 20%, you can bet your hat that their losses are more.