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Russia's oil and gas revenues decline in 2023: Bloomberg shares details

Russia's oil and gas revenues decline in 2023: Bloomberg shares details Photo: Russia's oil and gas revenues decline in 2023 (Getty Images)

Russia's budget deficit last year increased more than expected as revenues from oil and gas fell by nearly a quarter, writes Bloomberg.

The budget deficit reached 3.2 trillion rubles (36.1 billion dollars), equivalent to 1.9% of Russia's GDP.

The deficit grew as expenditures exceeded forecasts by 11%. According to the Russian Ministry of Finance, taxes on oil and gas, a key source of funding for the war against Ukraine, fell by 24% compared to the previous year. However, they still accounted for nearly a third of last year's total budget revenue.

Bloomberg notes that the flow of 'oil dollars' has declined as Russian barrel prices fell against the backdrop of the global crude oil market downturn and the strengthening of Western energy sanctions.

Impact on Russia

The reduction in state revenues from oil and gas puts additional pressure on the budget, while Russia plans to increase military spending by almost 70% in 2024.

Russia's decision to halt most of its natural gas supplies to Europe led to a more than 65% reduction in the budget's income from gas export duties.

Bloomberg notes that the annual decline in revenues from the gas extraction tax by 35% last year reflects a massive unexpected payment that Gazprom made in the second half of 2022.

Russia is trying to help its oil industry

Last year, the Russian government also paid 2.9 trillion rubles (32.7 billion dollars) in subsidies to the oil industry, further reducing net revenue.

Seeking to increase revenues, the Russian government halved one of the oil industry subsidies in September. This move resulted in a fuel deficit across Russia, prompting the government to reinstate full subsidies and even introduce a temporary ban on fuel exports to curb domestic prices.

Effectiveness of sanctions
The effectiveness of sanctions has diminished due to inadequate monitoring and enforcement of the oil price restriction policy, allowing Russia to sell its oil at prices higher than the set limit, the authors note.

Moreover, the 'oil refining loophole' legally allows oil products made from Russian crude oil to enter countries in other regions of the world. This primarily concerns India, which significantly increased its oil imports from Russia.

Earlier, U.S. Treasury Secretary Janet Yellen stated that Washington is preparing to take tough measures for violating the established oil price ceiling.

In December, Bloomberg reported that Russia's monthly income from oil exports exceeded that before the invasion of Ukraine. This underscores the failure of Western measures to limit its military budget.