Russia Energy Revenues Decline Despite Rising Oil Prices
(MENAFN) Russia’s oil and natural gas revenues have fallen sharply despite a surge in international oil prices, as the strengthening ruble and government payments to the domestic fuel industry weigh on public income. Ukrainian drone attacks targeting refineries have also disrupted Russian processing capacity and energy exports.
Revenue collected by Russia’s federal budget from oil and gas declined 17.2% year-on-year during the first nine months of the year, reaching 5.47 trillion rubles ($67.7 billion), according to Finance Ministry figures. The shortfall amounted to approximately $14.1 billion.
Overall federal budget revenues increased 10% over the same period to $367 billion, while income from non-energy sources climbed 18.8% to $299.3 billion, the data showed.
The decline in energy-related income came as conflicts in the Middle East pushed global energy prices higher. Although rising prices can increase the value of Russian oil exports, the amount transferred to the state budget also depends on the exchange rate and the benchmarks used to calculate taxes.
The average price of Urals crude, Russia’s main export oil grade, rose from $56.8 per barrel in September last year to $92.1 in September this year, representing an increase of approximately 62%.
The price surge strengthened oil producers’ earnings in foreign currencies but did not generate a comparable increase in government revenues. Russian oil exports are primarily priced in foreign currencies, whereas production taxes and budget income are calculated in rubles.
As the ruble strengthened against the US dollar, converting export earnings into the national currency generated fewer rubles. The decline in the average dollar exchange rate was therefore identified as one of the factors behind the energy revenue deficit recorded over the nine-month period.
According to the Russian Central Bank, the official exchange rate on Oct. 24 was below the level assumed in the 2026 federal budget, which used an exchange-rate assumption of $1.14 per dollar.
The Finance Ministry expects the benefits of higher oil prices to become more apparent in the coming months, as the impact of recent price increases takes time to feed through into tax collections.
Meanwhile, Ukrainian drone strikes against Russian industrial facilities and energy infrastructure have disrupted refinery operations and reduced processing volumes.
Russia’s 32 major refineries have a combined capacity of approximately 6.5 million barrels per day. However, their processing volume fell to 3.8 million barrels per day in June, according to the International Energy Agency (IEA).
The annual decline of 30% marked the lowest level in more than two decades, according to a report published on Sept. 17.
Russian refineries reportedly faced drone attacks roughly once every three days during the first eight months of the year. By the end of August, just five of the country’s 32 major facilities had escaped such attacks.
The IEA also reported that natural gas production declined by approximately 20% year-on-year, while diesel output dropped 30% over the same period.
Russian Deputy Prime Minister Alexander Novak recently acknowledged that the attacks were continuing but said protective measures had helped limit the damage. He added that repair work had been accelerated, although modernization plans at some facilities might need to be delayed.
Moscow has extended restrictions on exports of gas and certain petroleum products until Jan. 31, 2027. Exceptions remain in place for diesel shipments conducted under agreements between producers and arrangements between governments.
These restrictions limit the ability of energy companies to benefit fully from higher international fuel prices. The Economic Development Ministry forecasts that petroleum product exports will decline from 125.8 million tons last year to 98.5 million tons this year. By contrast, crude oil exports are expected to increase from 230.8 million tons to 244.7 million tons.
Government spending on the domestic fuel market has added further pressure to public finances. Moscow operates a fuel damper mechanism that compensates refineries when international market prices are more attractive than domestic prices, encouraging companies to supply the local market instead of directing more products abroad.
Although the system helps contain domestic fuel prices, it also increases the government’s financial obligations.
Payments to oil companies under the mechanism reached approximately $3.78 billion last month, up from $2.44 billion in August. The monthly amount was the highest recorded since April 2022 and contributed to the annual decline in energy revenues, according to Finance Ministry data.
During the first nine months of the year, oil and gas income fell below the baseline established under Russia’s budget rule. Higher international oil prices provided some support to state finances but were insufficient to offset the effects of the stronger ruble and fuel subsidies.
In response, the Finance Ministry reduced its 2026 forecast for oil and natural gas revenues from $110.46 billion to $93.87 billion, cutting its full-year projection by $16.59 billion.
The Economic Development Ministry also expects oil and gas condensate production to decline from 511.4 million tons last year to 494.2 million tons this year, before recovering to 500 million tons next year.
Russia’s budget position has deteriorated alongside the decline in energy income. The federal deficit reached $64.27 billion during January-September, prompting Moscow to raise its full-year deficit forecast from 1.6% of national income to 3.2%.
The outlook for Russia’s energy revenues will depend on several factors, including international oil prices, movements in the ruble, the recovery of refinery operations and the scale of government payments supporting the domestic fuel market.
Revenue collected by Russia’s federal budget from oil and gas declined 17.2% year-on-year during the first nine months of the year, reaching 5.47 trillion rubles ($67.7 billion), according to Finance Ministry figures. The shortfall amounted to approximately $14.1 billion.
Overall federal budget revenues increased 10% over the same period to $367 billion, while income from non-energy sources climbed 18.8% to $299.3 billion, the data showed.
The decline in energy-related income came as conflicts in the Middle East pushed global energy prices higher. Although rising prices can increase the value of Russian oil exports, the amount transferred to the state budget also depends on the exchange rate and the benchmarks used to calculate taxes.
The average price of Urals crude, Russia’s main export oil grade, rose from $56.8 per barrel in September last year to $92.1 in September this year, representing an increase of approximately 62%.
The price surge strengthened oil producers’ earnings in foreign currencies but did not generate a comparable increase in government revenues. Russian oil exports are primarily priced in foreign currencies, whereas production taxes and budget income are calculated in rubles.
As the ruble strengthened against the US dollar, converting export earnings into the national currency generated fewer rubles. The decline in the average dollar exchange rate was therefore identified as one of the factors behind the energy revenue deficit recorded over the nine-month period.
According to the Russian Central Bank, the official exchange rate on Oct. 24 was below the level assumed in the 2026 federal budget, which used an exchange-rate assumption of $1.14 per dollar.
The Finance Ministry expects the benefits of higher oil prices to become more apparent in the coming months, as the impact of recent price increases takes time to feed through into tax collections.
Meanwhile, Ukrainian drone strikes against Russian industrial facilities and energy infrastructure have disrupted refinery operations and reduced processing volumes.
Russia’s 32 major refineries have a combined capacity of approximately 6.5 million barrels per day. However, their processing volume fell to 3.8 million barrels per day in June, according to the International Energy Agency (IEA).
The annual decline of 30% marked the lowest level in more than two decades, according to a report published on Sept. 17.
Russian refineries reportedly faced drone attacks roughly once every three days during the first eight months of the year. By the end of August, just five of the country’s 32 major facilities had escaped such attacks.
The IEA also reported that natural gas production declined by approximately 20% year-on-year, while diesel output dropped 30% over the same period.
Russian Deputy Prime Minister Alexander Novak recently acknowledged that the attacks were continuing but said protective measures had helped limit the damage. He added that repair work had been accelerated, although modernization plans at some facilities might need to be delayed.
Moscow has extended restrictions on exports of gas and certain petroleum products until Jan. 31, 2027. Exceptions remain in place for diesel shipments conducted under agreements between producers and arrangements between governments.
These restrictions limit the ability of energy companies to benefit fully from higher international fuel prices. The Economic Development Ministry forecasts that petroleum product exports will decline from 125.8 million tons last year to 98.5 million tons this year. By contrast, crude oil exports are expected to increase from 230.8 million tons to 244.7 million tons.
Government spending on the domestic fuel market has added further pressure to public finances. Moscow operates a fuel damper mechanism that compensates refineries when international market prices are more attractive than domestic prices, encouraging companies to supply the local market instead of directing more products abroad.
Although the system helps contain domestic fuel prices, it also increases the government’s financial obligations.
Payments to oil companies under the mechanism reached approximately $3.78 billion last month, up from $2.44 billion in August. The monthly amount was the highest recorded since April 2022 and contributed to the annual decline in energy revenues, according to Finance Ministry data.
During the first nine months of the year, oil and gas income fell below the baseline established under Russia’s budget rule. Higher international oil prices provided some support to state finances but were insufficient to offset the effects of the stronger ruble and fuel subsidies.
In response, the Finance Ministry reduced its 2026 forecast for oil and natural gas revenues from $110.46 billion to $93.87 billion, cutting its full-year projection by $16.59 billion.
The Economic Development Ministry also expects oil and gas condensate production to decline from 511.4 million tons last year to 494.2 million tons this year, before recovering to 500 million tons next year.
Russia’s budget position has deteriorated alongside the decline in energy income. The federal deficit reached $64.27 billion during January-September, prompting Moscow to raise its full-year deficit forecast from 1.6% of national income to 3.2%.
The outlook for Russia’s energy revenues will depend on several factors, including international oil prices, movements in the ruble, the recovery of refinery operations and the scale of government payments supporting the domestic fuel market.
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