July 2025 sees a nearly 30% decrease in Russia's oil and gas earnings
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Russia's oil and gas revenues have taken a significant hit in recent months, with a decrease of 27-28% in July 2025 compared to the same period last year. This decline is primarily due to weaker global oil prices, a stronger ruble, declining oil and natural gas production, and the impact of Western sanctions, including EU price caps on Russian oil exports.
Key factors contributing to the revenue drop include weaker oil prices globally, appreciation of the Russian ruble, reduced production volumes, sharp declines in gas exports to Europe, and the impact of Western sanctions. The EU's flexible price cap mechanism limits Russian oil export prices to about 15% below market averages, effectively cutting Moscow's income per barrel. The stronger ruble reduces ruble-denominated revenues from oil and gas sales, while reduced production volumes and declining gas exports to Europe have led to significant losses in revenue.
The financial impact on Russia's budget is substantial. Oil and gas revenues, which normally compose about one-third of federal budget revenues, have fallen significantly. In July, total tax receipts from these sectors were 787.3 billion rubles (~$9.8 billion), down 27-28% year-on-year. Over the first seven months of 2025, total oil and gas revenues declined by roughly 19% compared to the same period in 2024. This decline contributes to budgetary strain, with Russia posting a deficit of 3.7 trillion rubles (1.7% of GDP) in the first half of 2025 amid heavy spending on the Ukraine conflict.
The decline in revenues also puts pressure on the National Wealth Fund allocations, initially projected at 1.8 trillion rubles in 2025 but now likely curtailed. The Russian government has revised its revenue forecast, lowering expected oil and gas income from RUB 10.94 trillion (US$121.6 billion) to RUB 8.32 trillion (US$92.4 billion) for the year. The government expects oil and gas income to be RUB 2.62 trillion (US$28.2 billion) lower in 2025 compared to the initial forecast.
In addition to the revenue drop, Russia's exports also saw a decline in the first quarter of 2025, dropping to US$94.9 billion, down 6.8% year-on-year. The country's oil and gas revenues in April 2025 were the lowest in nearly two years, amounting to US$13.2 billion. Gas revenues dropped by more than half in July 2025, decreasing by 53% to RUB 51.1 billion (approximately US$568 million). Oil revenues remain near a two-year low, despite growing export volumes.
The EU sanctions package, which may introduce a flexible price cap for oil, set at 15% below the market price, around US$47.6 per barrel, may further impact Russia's budget, potentially leading to a decrease in oil and gas revenues. The 18th EU sanctions package may also impact Russia's budget, potentially causing a further decrease in oil and gas revenues.
In summary, the revenue drop results from a combination of falling prices, currency effects, shrinking production, and sanctions, which collectively reduce vital financing for the Russian government, including its war expenditures. The government will need to find alternative sources of funding to cover the shortfall in oil and gas income, with the National Wealth Fund's reserves having already dropped nearly threefold to RUB 4 trillion (US$44.4 billion).
- The Russian government, facing a significant decline in oil and gas revenues, may be forced to seek funding alternatives from other sectors such as finance or the industry, given the budgetary strain caused by the revenue drop.
- Amid the ongoing revenue drop in the energy sector, the government's health expenditure could potentially suffer, as oil and gas revenues normally contribute a substantial portion to the federal budget, further exacerbating the strain on Russia's overall financial situation.
