Russia has admitted “problems” with oil and gas revenues that have fallen to their lowest levels in years, underscoring the impact of western restrictions on Moscow’s primary engine for funding its war in Ukraine.
Finance minister Anton Siluanov acknowledged issues during a public video conference with President Vladimir Putin on Wednesday, blaming “all these discounts” in explaining why energy revenues fell by more than 50 per cent in the first quarter of this year.
“Russia’s non-energy revenues are on track for growth as planned, with the potential for a small surplus by year-end, but there is a problem with energy revenues,” said Siluanov.
Russian oil has traded at a discount to global benchmarks because of a G7-led price caps on Russian oil and refined petroleum products, which were imposed in December and February, respectively.
This discount has narrowed as Russia has turned to non-western shipping, which is not covered by the cap, but remains significant enough to weigh on government coffers.
Despite the restrictions, in April Russia exported more oil than in any month since its full-scale invasion of Ukraine last year. Almost 80 per cent of crude shipments flowed to China and India, according to the International Energy Agency.
Yet, Moscow energy revenues for the first four months of 2023 plummeted to Rbs2.2tn ($27.3bn), levels not seen since the start of the Covid-19 pandemic, according to data from the finance ministry.
In response to Siluanov, Putin said the market situation remains “stable”. He added that Russia had addressed the issue of lower prices through “voluntary cuts” in oil production, in alignment with its OPEC+ partners.
However, Russia’s decision to cut production by 500,000 barrels per day, announced in February, had little immediate impact. Prices only rose in April after Opec announced unexpected further cuts.
Researchers at the Kyiv School of Economics estimate about 75 per cent of the decline in Russia’s revenues can be attributed to western sanctions, rather than market prices, based on analysis of oil sales records.
Siluanov also said Russia was spending at a faster rate than it was bringing in income in the first quarter of the year. However, he called the imbalance “temporary” and promised it would be levelled later.