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Russia is expecting extra oil and gas revenues to reach 1 trillion rubles, or $11 billion, in the last five months of the year despite sanctions, embargos, and price caps, two people with knowledge of the situation told Bloomberg.
The Finance Ministry hopes to put the fat revenues toward covering its budget deficit, which has bloomed thanks to the war in Ukraine, the anonymous sources suggest, although fiscal rules dictate that windfall revenues should be used to purchase foreign currency for the National Wellbeing Fund’s reserves.
But those rules could change, according to a statement made this week by the Finance Ministry. “The government may consider reducing the use of the National Wellbeing Fund for financing additional federal budget expenditures in the transition period of 2023-2024,” a Thursday statement read.
The $11 billion extra is in addition to the baseline level laid out in the country’s budget.
So far this year, the ruble has weakened compared to the dollar—which means more rubles in additional revenue for the government.
The extra windfall from oil and gas revenues comes even as Russia’s oil and gas revenues fell by 47% to 3.38 trillion rubles ($37.4 billion) in the first half of the year from the same period in 2022. In the first five months of the year, Russia’s budget deficit reached $42 billion, thanks in no small part to what it calls its “special military operation” in Ukraine.
The United States still have a positive outlook on the G7 price cap on Russian oil—a price cap that was designed to curtail the country’s oil and gas revenues to give it less to spend on its efforts in Ukraine. "Our approach has struck at the heart of the Kremlin’s most important cash cow. Before the war, oil revenues constituted about a third of the total Russian budget, but in 2023 that number has fallen to just 25%," a U.S. Treasury official said earlier this week.
Despite its outlook for increased windfalls, for September, Russia said it had plans to cut exports by 300,000 bpd—an announcement that helped to send oil prices higher.
By Julianne Geiger for Oilprice.com
Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.