Revenues from the sale of oil in Russia will be divided according to a new

The amended budget rule will come into effect next year.

The President of Russia approved the updated budget rule. It comes into effect next year in a truncated form, and from 2025 it will begin to work “in full”. According to experts, by that time the economic situation in the country will stabilize and all income from the sale of energy resources will become easily predictable – as before.

The budget rule is a mechanism aimed at protecting the Russian treasury from fluctuations in oil prices. Since 2004, when this concept burst into our lives, the rules have been amended four times. So that not a single petrodollar passes, as they say, past the cash register.

In fact, the next version of the document confirms that the main contributors to our budget for the period from 2023 to 2025 are still revenues from the oil and gas industry. We will live on them and fulfill our social programs and obligations.

The rule is, in fact, simple. As Russian Finance Minister Anton Siluanov said earlier, in 2023-25, basic oil and gas revenues will amount to 8 trillion rubles annually. They will go to the federal budget to finance expenses. And everything that is above this amount, excess income, will go to the “box”, that is, to the reserve fund.

Starting from 2026, the “bar” of 8 trillion rubles will be indexed by 4% every year, which, according to analysts, means an approximate level of annual inflation.

The law signed by the President provides for, among other things, a softening of the budget rule – for this period, higher spending will be allowed due to oil and gas rent. Therefore, spending from the National Welfare Fund is allowed in 2.9 trillion rubles in 2023 and 1.6 trillion in 2024.

We asked leading expert of the Center for Political Technologies Nikita Maslennikov to comment on the new version of the document.

What is the difference between the new budget rule and the old one?

– The fact that it does not have a cut-off price. Previously, a fixed price was set for a barrel of oil, which was indexed every year. If my memory serves me, 42-45 dollars. Incomes that fit into this price went directly to the budget. And everything that was above this bar was “cut off” and went to the National Welfare Fund, to the National Welfare Fund.

Now the situation has changed, we have suspended the operation of the budget rule, it will begin to work in full only in 2025. And in 2023 and 2024, all oil and gas revenues, in the amount of 8 trillion rubles, will go to the budget. If they exceed this amount, then with the permission of the government they can be sent to the NWF. And already from 2025, revenues exceeding 8 trillion rubles will automatically go to the National Welfare Fund, without a “go-ahead” from the Cabinet. This is the meaning of the new design.

– Previously, mutual settlements in the foreign market were carried out in dollars and euros. Now in our country they are becoming, as it were, “persona non grata”. Will something change?

– Nothing. Oil is sold for dollars. We will sell the currency through the markets, receive the ruble equivalent and contribute to the budget. So far, there is no other alternative mechanism. The problem was that savings in the NWF in “toxic currency” are not desirable for us. Until we find another solution, it is better to use this mechanism.

– How often is the budget rule changed or updated? Once every three years, because we have a three-year-old? Or under force majeure circumstances?

– Now force majeure. But the first test was the coronavirus pandemic. As a result, due to lack of resources, the budget rule was suspended. Now here is the situation with Ukraine.

It is clear that the design needs to be changed, moving away from the cut-off price. The economic sanctions imposed against us and discounts, which are difficult to predict under the current conditions, have a certain impact. The “Big Seven” plans to set a “ceiling” for oil in the coming days. “Gross” 8 trillion rubles to the budget is quite normal.