June 10, 2025
Falling oil prices, the abnormal strengthening of the ruble and the strengthening of Western sanctions have hit the raw materials “heart” of the Russian economy.
The net profit of companies producing oil and gas fell by almost half in the first quarter of 2025, Rosstat reported . Over three months, oil and gas corporations, on which every third ruble in the budget depends, earned 789.5 billion rubles against 1.445 trillion a year earlier.
The profitability of oil refineries dropped to almost zero. Over the quarter, oil product producers earned 4.5 billion rubles – 95.7%, or 23 times less than a year earlier.
Overall, the raw materials industry, which provides 14% of Russia’s GDP and half of budget revenues, lost 38% of its net profit: 1.098 trillion rubles compared to 1.759 trillion in the first quarter of last year.
Oil companies’ accounts are emptying as oil prices fall: if in January a barrel of Russian Urals was sold abroad for $66, then by the end of March the price had fallen to $59, and by the end of May to $52. This has dropped foreign exchange earnings from oil exports to a 2.5-year low of $1.2 billion a week, according to Bloomberg .
The Russian budget then “burst at the seams”: in May, its oil and gas revenues collapsed by 34%, and the deficit for five months was almost three times higher than the Finance Ministry’s initial plan – 3.4 trillion rubles against 1.2 trillion.
Tightening Western sanctions – with the inclusion of new “shadow fleet” tankers in “black lists” and the reduction of the “price ceiling” from $60 to $45 per barrel – promises “difficult times” for oil companies and pain for the budget, experts from the Institute of Energy and Finance write .
There are already 426 tankers under sanctions — half of the Kremlin’s “shadow fleet,” and most of these vessels have been cut out of the global oil trade. But Russian oil, while it currently costs less than $60, is being transported by Greek shipowners, who will refuse to transport it if the “price ceiling” is lowered. If the United States joins the European decision to lower the price ceiling, “a significant reduction in seaborne oil exports from the Russian Federation is likely” and “an even greater reduction in oil revenues in the second half of this year,” writes IEF. The treasury may lose 800 billion rubles in oil and gas revenues, estimates Freedom Finance Global analyst Vladimir Chernov.
Against the backdrop of falling prices, oil companies will try to reduce dividend payments in order to leave more for the development of companies in the context of expensive loans, but the authorities will resist this, believes Igor Yushkov from the Financial University under the Government of the Russian Federation.
“There are many problems that make the management of the companies at least be cautious (with payments), and on the other hand, the state, where they have a share, in order to close the hole in the budget, which is growing, will lobby for increased dividends so that more money gets into the budget,” Yushkov explains. He does not rule out that the government will think about increasing the tax burden on oil companies to cover the treasury deficit.
And to make things even more interesting, the EU is planning to lower the oil price cap from $60 to $45.