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Russia’s Finance Ministry has set its oil export levy at $21.40 per ton starting in September—the highest level this year—as the state tries to lift oil-derived income as oil prices rise, Bloomberg stated on Tuesday. That works out to about $2.92 per barrel.
Russia’s budget relies in no small part on money derived from taxes from crude oil. And now more than ever, Russia’s budget is being sapped by its long-running “special military operation” in Ukraine, as well as by Western sanctions, price caps, and embargos on its crude oil and natural gas. Crude oil prices have risen over the last couple of months as OPEC+ continues to cut production targets, mainly led by Saudi Arabia. Russia, too, has curbed its crude oil exports, which has helped to lift prices. Russia has even managed to sell much of its oil above the oil price cap established by the G7.
The money from the oil export duties are a small part of Russia’s overall oil-derived income, and there are more oil tax law changes coming as the government attempts to work out how it 0should calculate Russia’s taxable oil price in the wake of the West’s price capping. For now, Russia’s extra income from oil and gas sales are expected to reach $8.1 billion above baseline on higher prices, according to Maxim Oreshkin, economic advisor to Russia’s President Putin said earlier this week.
Eventually, the tax reform will leave Russia’s oil companies with fewer dollars to invest in exploration and production over time, Washington had previously pointed out as it highlighted what it views as a successful price capping campaign to restrict Russia’s oil revenues.
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.