Russia’s monthly budget revenues from oil and gas fell in January to their lowest level since August 2020 under the impact of Western sanctions on its most lucrative export, Finance Ministry data showed on Friday.
Monthly tax and customs revenue from energy sales declined 46% in a year – reflecting the fact that, while the price of the global benchmark Brent blend was little changed, the average monthly price of Russia’s Urals blend was down 42%, according to the ministry.
Moscow relies on income from oil and gas – last year around 11.6 trillion roubles ($165 billion) – to fund its budget spending, and has been forced to start selling international reserves to cover a deficit stretched by the cost of its invasion of Ukraine.
January’s figure stood at 425.5 billion roubles ($6.05 billion).
The Finance Ministry on Friday said it would almost treble its daily sales of foreign currency to 8.9 billion roubles ($130 million) a day over the next month to compensate for the fall in oil and gas revenues.
Western Pressure
The West – previously Russia’s main energy market – has responded to the invasion of Ukraine by targeting its energy revenues through unprecedented sanctions that also restrict sales to third countries – and are set to tighten further.
Brussels has blocked the seaborne imports that accounted for 90% of Russian crude oil sales to the European Union, and member states have cut the share of Russian gas in their import mix from more than 40% before Russia invaded Ukraine to under 15%.
An EU embargo on purchases of Russian refined oil products, including diesel and jet fuel, takes effect on Sunday and could hurt Moscow more than an embargo on crude oil. Price caps, if agreed, could further hamper sales to third countries.
The international restrictions, including a $60 a barrel crude price cap imposed by the Group of Seven major powers, have meant that Russia’s Urals blend – which previously traded at a similar price to Brent – now sells at a heavy discount.
The average price in January was $49.48 a barrel, the finance ministry said, down 42% on January 2022.
Unless prices for Russian oil recover in the coming months, analysts at Credit Bank of Moscow said on Friday the budget deficit could hit 5.5 trillion roubles ($78 billion) this year, equivalent to 3.8% of GDP.
Russia’s budget for 2023 foresees a deficit of 2% of GDP, and any larger shortfall would require a mix of higher foreign currency sales, lower spending, more borrowing or tax rises.
Russia’s Kommersant newspaper reported on Friday that the Kremlin was looking at changing the way it calculates taxes on oil and gas companies to cover some of the shortfall.
On Friday, Brent was trading at around $82, and Urals at around $53.60.
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