Russian oil revenues fall for the second month in a row
4 December 16:46
In November, the Kremlin’s oil revenues fell for the second month in a row on an annualized basis, due to falling Russian oil prices. This was reported by Komersant ukrainskyi reports with reference to Bloomberg.
According to Bloomberg’s calculations based on data from the Russian Ministry of Finance released on Wednesday, oil and gas taxes, which are a key source of funding for Russia’s war against Ukraine, brought in 605.2 billion rubles ($5.8 billion) to the budget. This is 21% less than in the same period last year.
Reasons for the drop in revenues
The decline in revenues is due to lower oil prices due to fears of a global oversupply, despite geopolitical tensions in the Middle East and the November decision by the Organization of the Petroleum Exporting Countries (OPEC) to keep some volumes on the market.
The Russian Ministry of Finance calculated the tax base based on the price of $64.72 per barrel of Urals, Russia’s main export crude. This is significantly less compared to $81.69 per barrel in November last year.
In November, Russia’s total oil and gas revenues, 76% of which come from the oil industry, fell by almost 17% to 801.7 billion rubles.
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Impact on war financing
The decline in oil revenues may limit the Kremlin’s ability to finance the war against Ukraine, as defense spending is the largest item in Russia’s budget this year. Nevertheless, in 2025, Russia plans to increase spending on defense and internal security, bringing it to a record 13 trillion rubles.
The Central Bank of Russia has stated that current oil prices are acceptable for the economy. However, a drop in oil prices below $60 per barrel could “create difficulties for the economy and financial markets,” according to the financial stability report published on Friday.
Market outlook: OPEC decision
On Thursday, OPEC, where Russia is one of the de facto leaders, plans to finalize its production policy for the first months of 2025. According to Bloomberg’s sources, the proposal to postpone the return of certain volumes for three months has not yet met with objections.
Nevertheless, analysts warn that the oil market may face a glut in 2025 even if OPEC does not increase production. To support global prices, the alliance may need to take more drastic measures to avoid a further drop.
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