(Bloomberg) -- The Russian state’s oil revenue showed slight annual growth in September, as the government offset weaker energy prices by halving monthly subsidies to the nation’s crude producers.
The Russian budget received a total of 597.2 billion rubles ($6.28 billion) from its oil industry last month, up nearly 4% from a year earlier, the Finance Ministry said on Thursday. This is a key source of funds for the Kremlin as it seeks to withstand Western sanctions and cover the growing military cost of the invasion of Ukraine.
Proceeds from key levies on the companies were lower amid a stronger ruble and weaker prices for Russian main crude export blend, Urals. The Kremlin’s combined revenue from oil-production taxes and the so-called oil profit-based tax in September declined to 902 billion rubles, almost 10% lower than a year earlier, according Bloomberg calculations based on the ministry data.
Lower subsidies to Russian oil producers, paid to encourage gasoline and diesel supplies to the domestic market, offset this decline. In September, the payouts reached 145.7 billion rubles compared with nearly 300 billion rubles a year ago. The drop in payouts reflects a narrower gap between Russia’s domestic fuel price and the virtual price for fuels in northwestern Europe.
The government sees the export price of Russian Urals crude dropping in the next three years, yet the invasion in Ukraine will still be amply financed, with military expenditures at historic highs, the Russian budget draft for 2025-2027 shows.
While global crude prices have increased in recent days amid the military crisis in the Middle East, the fundamentals of supply and demand are a concern for main crude producers and exporters. Russia and its allies in the Organization of Petroleum Exporting Countries are trying to balance the market by withholding some output until December, when a phased production restart is set to begin.
Russia’s September oil taxes were calculated based on the Urals price of $70.27 a barrel and an exchange rate of around 89 rubles per US dollar. In September 2023, a Urals barrel averaged $73.73 and the Russian currency traded at 95.28 per US dollar, according to data from the Federal Tax Service.
Russia’s September proceeds from the gas industry alone grew almost 6% year on year, to almost 175 billion rubles, spurred by rebounding production, pipeline exports and robust domestic demand.
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