Russia’s Budget Deficit Jumps Amid Plunging Oil Revenues

Russia’s budget was $24.7 billion (1.76 trillion rubles) into deficit in January, compared to a surplus for January 2022, as state revenues from oil and gas plunged by 46.4% due to the low price of Urals and lower natural gas exports, the Russian Finance Ministry said in preliminary estimates.

Total budget revenues slumped by 35% last month compared to the same month of 2022, while overall budget expenditures jumped by 58.7% year-on-year in January, the ministry’s data showed.  

Russia’s non-oil and gas revenues also dropped, by 28.1% year over year, according to preliminary estimates.

The revenue slump last month came from the key export revenues for the Russian state—oil and gas.

The low price of Russia’s flagship grade is reducing Russian revenues from oil due to the steep discount at which Urals trades relative to the international benchmark Brent Crude.

The average price of Urals in January, at $49.48 per barrel, was 1.7 times lower than in January 2022, when it averaged $85.64 per barrel, the Finance Ministry said last week. 

The price of Urals has slumped to a discount of nearly $40 per barrel to the price of Brent Crude, which reduces Russia’s budget revenues from oil export taxes. Since the start of the EU embargo on crude oil imports from Russia and the G7 price cap, the per-barrel crude export duty for the Russian state has shrunk due to the plunge in the price of Urals.

Russia is considering taxing its oil firms based on the price of Brent – instead of Urals – to limit the fallout on the Russian budget revenues due to the widening discount of Urals to Brent, Russian daily Kommersant reported last week, quoting sources.

In the budget estimate for January this week, the Finance Ministry confirmed parts of this report, saying that “considering the fact that the relevance of the price of Urals in calculating export prices has diminished, various other approaches are currently being studied to switch to alternative price indicators for tax purposes.”