Russia’s oil and gas revenue shrank by over a quarter last month amid lower crude prices and capped gas flows to Europe.
(Bloomberg) — Russia’s oil and gas revenue shrank by over a quarter last month amid lower crude prices and capped gas flows to Europe.
Budget proceeds from oil and gas taxes dropped 26% in June from a year ago to almost 529 billion rubles ($5.84 billion), the Finance Ministry said Wednesday. Gas taxes fell 54% to 125.7 billion rubles, while proceeds from crude and petroleum products — which account for over 76% of hydrocarbon revenue — declined by almost a tenth to 402.8 billion rubles, according to Bloomberg calculations.
Russia’s war in Ukraine is straining the nation’s coffers amid the rising cost of financing the Kremlin’s military aggression while the economy is under Western sanctions. Taxes from the oil and gas industry remain a key source of revenue, even though they now contribute less than a third to Russian budget proceeds.
Earlier this year, Russia tweaked the way it assesses oil prices for tax purposes in an effort to boost budget revenue after Group of Seven nations imposed a price cap on its oil sales and the European Union banned most seaborne imports of crude and products.
The Finance Ministry introduced a discount to the global Brent benchmark, which sets the floor price for the nation’s crude for budget purposes. If Russian oil trades above the threshold, the ministry uses the prevailing market price to calculate taxes. In June, Russia’s key export blend Urals averaged $55.28 a barrel, or $8.6 higher then the price calculated using the discount mechanism.
The government also plans to halve the downstream subsidies it pays to refiners as it seeks to limit budget spending, and plans to fine-tune existing indicators and set new ones to assess the oil price for budget purposes.
The drop in gas exports to Europe, once the biggest market for Russia’s gas giant Gazprom PJSC, contributed the most to the decline in gas revenue. Proceeds from gas export duty fell 86% to 30.1 billion rubles. The revenue from the mineral extraction tax on gas reached 95.6 billion rubles, and comes amid a temporary increase of the duty for Gazprom of 50 billion rubles per month in 2023 to 2025.
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