Western sanctions push Russia’s energy revenues to lowest level since 2020

February 3

Russia’s monthly budget revenues from oil and gas fell in January to their lowest level since August 2020 under the impact of Western sanctions on Russian exports, Finance Ministry data showed on Friday.

Monthly tax and customs revenue from energy sales was down 46 per cent in the space of a year – reflecting the fact that, while the price of the global benchmark Brent blend was little changed, the average monthly price of Russia’s Urals blendwas down 42 per cent, according to the ministry.

Moscow relies on its multibillion-dollar earnings from oil and gas sales to fund its budget spending, and has been forced to start selling down some international reserves to cover the shortfall.

The data also showed budget income from energy had dropped 54 per cent from December’s earnings of 931.5 billion roubles ($13.2 billion), though these were inflated by a one-off tax payment by monopoly gas exporter Gazprom.

January’s figure stood at 425.5 billion roubles ($6.05 billion).

The finance ministry on Friday said it would almost treble its daily sales of foreign currency to 8.9 billion roubles ($130 million) a day over the next month to compensate for the fall in oil and gas revenues.

The West – previously Russia’s most lucrative energy market – has responded to Russia’s invasion of Ukraine by targeting its energy revenues through an unprecedented package of sanctions that is set to tighten further.

Brussels hopes its restrictions will cut off 90 per cent of Russia’s oil exports to the European Union, and member states have cut the share of Russian gas in their import mix from more than 40 per cent to under 15 per cent since Russia invaded Ukraine.

The international restrictions, including a $60 a barrel price cap imposed by the Group of Seven major powers, have meant that Russia’s Urals blend – which previously traded at a similar price to Brent – now sells at a heavy discount.

The average price in January was $49.48 a barrel, the finance ministry said, down 42 per cent on January 2022.

On Friday, Brent was trading at around $82, and Urals at around $53.60.

The Russian government earned 11.6 trillion roubles ($165 billion) on oil and gas sales last year, the finance ministry said. Reuters