Oil revenues in Russia decreased by a third in July, according to Bloomberg's report.
In July 2023, Russia's oil revenues saw a significant drop, decreasing by a third compared to the same period the previous year. The oil and gas industries, contributing to about a third of all budget revenues in Russia, are struggling amidst the ongoing decline.
The average price of Urals crude oil, Russia's main export blend, was $59.84 per barrel in June, based on which oil revenues were calculated. However, the strengthening of the ruble in June contributed to the decrease in oil revenues, with the average exchange rate being 78.7 rubles per dollar, the highest in two years.
The decline in global crude oil prices, a trend that began in 2020, has had a lasting impact on Russia's fiscal health. In 2020, decreasing global crude oil prices significantly reduced Russia's oil revenues, directly impacting state finances by lowering budget inflows from the oil and gas sector. This trend was driven primarily by a global supply-demand imbalance exacerbated by the COVID-19 pandemic and geopolitical factors.
The primary reasons for the declining oil prices in 2020 included reduced global demand due to COVID-19 lockdowns and economic slowdowns, as well as oversupply tensions within OPEC+ countries before their production cuts took full effect. Sanctions and geopolitical tensions, including Western sanctions following Russia’s actions in Ukraine, also constrained Russia’s ability to realize full market prices for its exports.
The ongoing decline in oil revenues has forced budget shortfalls and revisions. For instance, in 2025, Russia’s federal budget saw a 19% decline in oil and gas sector revenues compared to the previous year. These trends imply that the 2020 revenue drop strained Russia’s fiscal capacity, requiring adjustments such as cutting compensations to oil companies and revising budget forecasts downward.
The situation is further complicated by the ongoing geopolitical tensions. US President Donald Trump has threatened sanctions against countries buying Russian energy resources, while the European Union has announced plans to lower the price cap on Russian oil. These measures could potentially further reduce Russia's oil revenues and exacerbate the strain on state finances, especially in the face of massive war spending.
Russia's oil industry is losing profits amidst these challenges. In July 2023, oil revenues totaled 787.3 billion rubles, a 27% decrease from the year before. Despite the increase compared to June, oil revenues in July 2023 were still 14% lower than the year before. The oil industry in Russia is still losing profits amidst Western sanctions and threats of new restrictions from the US.
As a result of the strengthening ruble, oil companies received 4,711 rubles (around $58) per barrel in June, compared to 6,127 rubles (around $76) per barrel the year before. This decrease in revenue per barrel, despite the increase compared to June, continues to strain state finances in Russia.
In conclusion, the decline in global crude oil prices continues to strain Russia's state finances, with the ongoing challenges in the oil and gas industries exacerbating the situation. The combined effect of the pandemic’s demand shock, OPEC+ market dynamics, geopolitical challenges, and potential sanctions could further impact Russia's fiscal health in the coming months.
- The ongoing decline in global crude oil prices and the subsequent drop in Russia's oil revenues are causing significant strain on the country's state finances, as the oil and gas industries contribute a substantial portion to Russia's budget revenues.
- The energy sector, particularly the oil and gas industries, is grappling with profit losses in Russia due to the strengthening ruble, reduced oil prices, geopolitical challenges, and potential sanctions, which are all impacting state finances and fiscal health.
