Russia’s oil and gas revenues fall 17.2% amid Ukrainian drone strikes

Russia’s oil and gas revenues fell 17.2% year-on-year in January-September, while Ukrainian drone attacks on Russian refineries pushed oil processing to a 20-year low.

According to Anadolu Agency, citing Russia’s Finance Ministry, federal budget revenues from oil and gas declined to 5.47 trillion rubles ($67.7 billion) in the first nine months of the year, resulting in an estimated $14.1 billion shortfall in energy revenues.

Meanwhile, total federal budget revenues rose 10% to $367 billion, while non-energy revenues increased 18.8% to $299.3 billion over the same period.

Russia’s energy revenues have declined despite rising oil prices amid conflicts in the Middle East. Higher prices could potentially boost the value of Russian exports, but budget receipts depend not only on selling prices but also on the indicators used to calculate taxes.

The average price of Russia’s flagship Urals crude exceeded $92 per barrel in September. The 62% increase boosted oil producers’ foreign-currency earnings, but the gains were not reflected to the same extent in federal budget revenues.

Russia prices much of its oil exports in foreign currencies, while production taxes and budget revenues are calculated in rubles. A stronger national currency means that the same amount of dollar-denominated export earnings converts into fewer rubles. The decline in the average dollar exchange rate was cited as one of the reasons for the nine-month shortfall in energy revenues.

Russia’s Finance Ministry expects the recent rise in oil prices to have a more pronounced positive impact on budget receipts in the coming months, as the effects of higher prices take time to feed through into tax collections.