Russia has acknowledged “problems” in its oil and gas revenue, which is at the lowest level in many years. This highlights the impact of Western restrictions on Moscow’s main source for funding their war in Ukraine.
In a videoconference with President Vladimir Putin, Anton Siluanov admitted that there were issues. He blamed “all these discounts” for the revenue falling by more than 50% in the first three months of this year.
Siluanov said that Russia’s non-energy revenue is on track to grow as planned. There could be a small surplus at the end of the year, but energy revenue has a problem.
Russian oil is trading at a discount compared to benchmarks globally due to a G7 led price cap on Russian crude oil and refined petroleum product, which was imposed in December, and February respectively.
The discount is smaller as Russia now focuses on non-western shipping. This does not fall under the cap but still has a significant impact on government finances.
Despite these restrictions, Russia export more crude oil in April than it has ever done since the full-scale invasion in Ukraine last year. According to the International Energy Agency, almost 80 percent of crude oil shipments went to China and India.
According to the Finance Ministry, Moscow’s energy revenues in the first four month of 2023 fell to Rbs2.2tn (about $27.3bn), a level not seen since the Covid-19 pandemic.Putin responded to Siluanov by saying that the market is “stable”. He said that Russia, along with OPEC+ members, had taken steps to address the issue of lower oil prices by “voluntary” cutting production.
The decision by Russia to reduce production by 500,000 barrels a day announced in February had little impact on the market. Only in April did prices rise after Opec announced further unexpected cuts.
Based on an analysis of oil sale records, researchers at the Kyiv school of economics estimate that about 75 percent of the decline in Russia’s revenues can be attributed not to market prices but rather western sanctions.
Siluanov said that Russia spent more than it earned in the first three months of the year. He called the imbalance “temporary”, and said it would be corrected later.