Russian Oil Revenues Plunge to 5 Year Low

The Russian government’s oil revenues collapsed to the lowest in more than five years in January as weaker global prices, steeper discounts for the nation’s barrels, and a stronger currency took a toll on the budget.

Oil-related taxes halved to 281.7 billion rubles ($3.7 billion) last month from a year earlier, according to Bloomberg calculations based on finance ministry data published Wednesday. Combined oil and gas revenue also declined by 50%, to 393.3 billion rubles. 

Lower proceeds from the two industries, which between them contribute about a quarter of the budget, will put more strain on the nation’s coffers as the war in Ukraine drags toward a fifth year with little sign of ending. 

Brent oil futures were 15% lower year on year for the fiscal period, but US sanctions made the market downturn even worse for Russia. January’s oil revenue was the lowest since June 2020.

The nation’s flagship grade Urals traded at about $26 a barrel below Dated Brent, a benchmark for physical oil trades, at the point of export. That compares with over $12 below the same marker a year earlier, data from Argus Media show. 

The discounts ballooned following the US blacklisting of Rosneft PJSC and Lukoil PJSC, Russia’s two largest producers, measures that were announced in October.

This week, US President Donald Trump said the US would cut import tariffs for goods from India — a major buyer of Russian crude — in exchange for New Delhi halting purchases of oil from Moscow. It’s not clear the extent to which India will cut back in practice.

Russia’s finance ministry calculated oil revenue based on the average price of Urals of $39.18 a barrel in December, a 38% drop from a year earlier. That’s much lower than the government assumed when planned nation’s budget for this year and expected crude to average of $59 a barrel in 2026.

Russia’s budget receives 57 cents from every dollar of oil price above $13.60 a barrel, according to estimates from Sergey Vakulenko, a former Russian oil executive and now senior fellow at the Carnegie Endowment for International Peace. That means the government received about $14.50 a barrel in taxes last month, while companies kept about $24.70, with roughly $14-$18 of that spent to pump crude and deliver it to an export point, he added. 

A big challenge, though, is the stronger ruble.

“What really hurts both the companies and the government is the exchange rate,” as their expenses are mostly ruble-denominated and depend on domestic inflation, Vakulenko said. 

In December, the Russian currency averaged 78.4368 rubles against the dollar, almost 25% stronger than a year ago.

Still, lower global crude and oil-product prices helped the Russian government to cut subsidies it pays to nation’s refiners to boost fuel sales to the domestic market.

In January, the transferred 16.9 billion rubles in subsidies, a drop of almost 90% from a year ago and the lowest outlay since October 2023, when there were zero payments.

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