Russia’s oil and gas revenues rose more than 80 per cent in February from a year earlier to more than $10 billion thanks to higher oil prices as its producers withstood Western sanctions, Bloomberg reports.
The Finance Ministry said on Tuesday that budget revenues from oil and gas taxes totalled 945.6 billion rubles ($10.4 billion) last month. Taxes on oil and petroleum products, which account for 84 per cent of all hydrocarbon revenues, more than doubled, according to Bloomberg calculations.
Oil taxes were based on an average price of $65 a barrel for Urals crude, Russia’s main export blend, up from $50 a year ago.
Russia’s oil and gas sectors are a key source of revenue for state coffers, which are under pressure from rising costs related to the military conflict in Ukraine and defence spending.
To curb Russia’s oil revenues, Western countries imposed sanctions that dropped the price of Urals crude below $50 a barrel in February 2023.
At that time, the Group of Seven countries imposed a price cap of $60 a barrel on the country’s oil cargoes, and the European Union banned most maritime imports of oil and oil products from Russia. While buyers from other countries are free to purchase Russian barrels at the higher price, they are not allowed to use Western services such as insurance and shipping.
Moscow has limited the impact of price controls by using a huge shadow fleet of tankers and working with non-Western buyers, intermediaries and service providers.
The US and its allies have tightened enforcement of the price corridor since November, sanctioning several ships and traders for violating the restrictions. The toughened stance has again led to a widening of the Urals discount to the Brent benchmark.
But to protect cash flows to the budget, Russia used the so-called price floor mechanism, obliging producers to pay taxes based on an artificial discount of Urals to Brent of $15 per barrel. This money was received by the budget in February. The actual discount at which producers sold Urals cargoes averaged more than $18 at Russian ports in January, according to Argus Media Ltd. data.
Russia has been gradually reducing export duties on crude oil and oil products since 2019 and has cancelled them completely as of this year. To compensate for the falling revenues from export duties, the authorities raised the oil production tax. As a result, Russia’s oil production tax revenues became the highest in almost two years.
According to the ministry, Russia also paid 127.9 billion roubles in subsidies to its oil refiners in February for selling diesel and petrol on the domestic market. These payments, which usually reduce oil revenues, partially compensated refiners for the gap between domestic and foreign motor fuel prices.
