ADVERTISEMENT

Investing

Kremlin Oil, Gas Revenues Up by Fifth as Demand for Flows Rises

(Finance Ministry)

(Bloomberg) -- The Russian government’s revenues from taxes on oil and gas surged by a fifth in August from a year ago following soaring prices of the nation’s crude and higher gas flows to foreign markets. 

Listen to the Here’s Why podcast on Apple, Spotify or anywhere you listen.

The levies brought in 778.6 billion rubles ($8.7 billion) last month, up by 21% from a year ago, the Finance Ministry said Wednesday. Taxes on crude and petroleum products accounted for almost 80% of total hydrocarbon revenues, according to Bloomberg calculations based on the data. The August budget revenues reflect prices, production and exports levels for July.

Oil and gas are key contributors to the nation’s coffers, under pressure from Western sanctions and the growing military cost of the Kremlin’s invasion of Ukraine. In the first seven months of the year, both industries accounted for over a third of Russia’s budget revenues. 

The Russian oil industry has benefited from surging prices for Urals crude, the key export blend. August oil taxes were calculated based on a Urals price of $74.01. a barrel, up from $64.21 a year earlier.

Discounts on Russia’s crude to the Brent benchmark narrowed by over a third from a year ago, as its producers adapted to international sanctions, including the Group of Seven price cap and a European ban on Russian crude, by finding new buyers for its barrels and deploying a massive shadow fleet. 

Tax proceeds from the oil industry would have been even higher in August without state subsidies to refiners. They received 163.3 billion rubles from the budget for domestic sales of gasoline and diesel, the ministry’s data show. The payments are partial compensation to account for the difference between car fuel prices in the domestic and foreign markets.

Month on month, oil revenue shrank by almost 42%, Bloomberg calculations show. That’s because one of Russia’s key oil taxes — a profit-based levy — is paid four times a year, in March, April, July and October. 

Rebound in Gas Flows

August taxes from the gas industry alone jumped more than 24% year on year, to almost 163 billion rubles, spurred by Gazprom PJSC’s rebounding exports and robust domestic demand. 

Daily deliveries to China via the Power of Siberia gas link in July set a historic record and repeatedly exceeded contractual obligations, according to the Russian producer, which did not provide any specific figures. Gas exports to the Asian nation rose by almost 33% from a year ago to 2.8 billion cubic meters, according to Bloomberg calculations. 

Pipeline gas flows to Europe, which still continue via Ukraine and Turkey, climbed by almost 6% to 2.67 billion cubic meters, according to the calculations.

©2024 Bloomberg L.P.