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6 April, 14:55
Business and Economy

Russia’s oil revenues drop by nearly 50% amid war in Ukraine

Russia’s income from oil-related taxes in March fell sharply—by almost 50% compared with the same month last year—underscoring mounting pressure on the country’s finances just before geopolitical turmoil in the Middle East unexpectedly lifted its revenues.

According to calculations based on Finance Ministry data, Russian oil companies paid about 494.9 billion rubles (around $6.18 billion) in taxes for March, marking a 48% annual drop. Overall proceeds from oil and gas feeding into the federal budget also declined significantly, sliding nearly 43% year over year to 617 billion rubles.

This slump largely stems from the pricing basis used for taxation. March’s tax figures were tied to February’s average price for Urals crude, Russia’s flagship export grade. During that period, the price hovered below $45 per barrel—far short of the $59 per barrel benchmark built into the country’s 2026 budget projections. Prices were dragged down as buyers continued to insist on substantial discounts due to ongoing sanctions, while a stronger ruble further reduced revenue when converted into local currency.

Lower earnings from energy exports have deepened Russia’s budget deficit, especially as economic momentum weakens and military expenditures related to the war in Ukraine continue to strain public finances.

However, this downturn may prove temporary. A rebound is expected as early as the following month, driven by a surge in oil prices during March linked to conflict in the Middle East. By late March, shipments of Urals crude to India—a major customer—were reportedly fetching over $120 per barrel, even exceeding the global Brent benchmark.

Tensions involving Iran have effectively disrupted traffic through the Strait of Hormuz, a crucial artery for Gulf oil exports. Because Russian shipments do not depend on that route, they have become more appealing to Asian buyers seeking reliable supply.

Meanwhile, efforts by the United States to ease global price pressures have included granting broad permissions for countries such as India to acquire large volumes of Russian oil already in transit. This policy has further strengthened demand in Asia for Russian crude.