Russia admits ‘problems’ with falling energy revenues

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Russia has admitted “problems” with oil and gas revenues which fell to their lowest levels in years, underlining the impact of Western restrictions on Moscow’s main mover to finance its war in Ukraine.

Finance Minister Anton Siluanov acknowledged the problems during a public video conference with President Vladimir Putin on Wednesday, blaming “all these discounts” on explaining why power revenues fell more than 50% in the first quarter of this year.

“Russia’s non-energy revenues are on track for growth as expected, with the potential for a small surplus later this year, but there is a problem with energy revenues,” Siluanov said.

Russian oil traded at a discount to global benchmarks due to G7-led price caps on Russian oil and refined petroleum products imposed in December and February respectively.

This discount has shrunk as Russia it 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 his full-scale invasion of Ukraine last year. Nearly 80% of crude oil shipments went to China and India, according to the International Energy Agency.

However, Moscow’s energy revenues for the first four months of 2023 plunged to 2.2 trillion rubles ($27.3 billion), levels not seen since the start of the Covid-19 pandemic, according to data. of the Ministry of Finance.

In response to Siluanov, Putin said the market situation remains “stable”. He added that Russia has addressed the issue of lower prices through “voluntary cuts” in oil production, in line with its OPEC+ partners.

However, Russia’s decision to cut production by 500,000 barrels a day, announced in February, had little immediate impact. Prices only increased in April after OPEC announced further unexpected cuts.

Researchers of the Kyiv School of Economics esteem about 75% of Russia’s revenue decline can be attributed to Western sanctions, rather than market prices, based on analysis of oil sales data.

Siluanov also said Russia is spending at a faster pace than it was generating revenue in the first quarter of the year. However, he called the imbalance “temporary” and promised it would be leveled later.