Oil and gas contribution to Russian budget falls by almost half in two months

Russia's budget experienced a deficit of 2.6 trillion roubles (34.1 billion dollars) between January and February, due to a 51.5% increase in expenditure and a 24.8% drop in revenue, especially acute due to the almost halving of the contribution to the accounts of gas and crude oil. 

According to the Finance Ministry's preliminary analysis of budget execution in the first two months of the year, revenues amounted to 3.2 trillion roubles ($41.8 billion), 24.8% less than in the same period of 2022. 

By contrast, Russian state spending amid Russia's military campaign in Ukraine soared to 5.74 trillion roubles or $75.9 billion, up 51.5%. 

Oil and gas revenues totalled 947 billion roubles ($12.5 billion), down 46.4% from January-February last year. 

The Finance Ministry explains that this decrease was mainly due to lower Urals oil prices and a decline in natural gas exports. 

Already on February 3, the Ministry of Finance pointed out that in February the federal budget received 46.3% less than in the same month of the previous year from oil and gas revenues. 

Finance pointed out that due to a decline in the Urals crude oil price as an objective formula for defining Russian oil export prices and thus calculating budget revenues, Russia defined a new mechanism in February. 

Russia has calculated its budget at $70 per barrel, while Urals is currently quoted at $59.89. The Russian government has not yet specified this. 

The Russian government has not yet specified it, but the ministry claims that the new calculation mechanism "will contribute to a gradual recovery of tax revenues from the oil sector, especially in the second half of the year. 

In addition, it says, the National Welfare Fund, a kind of piggy bank for bad times, will cover lower oil and gas revenues under the budget rule. 

On 5 December, the European Union (EU) embargo on seaborne oil from Russia came into force, a measure that coincided with the imposition by the EU, the G7 and Australia of a price ceiling of $60 a barrel on Russian crude oil. 

In addition, on 5 February the EU, the G7 and Australia also began applying price caps on Russian oil products; $100 per barrel for diesel and $40 per barrel for other derivatives. 

As for non-oil and gas revenues, the Finance Ministry says that in January and February these stood at 2.2 trillion roubles ($29.15 billion), down 9%, due to a drop in taxes collected.