Russia will miss tens of billions from the export of raw materials: will the petroyuan save the budget

Experts talk about big problems in 2024

In recent months, our country has experienced a serious drop in revenues from hydrocarbon exports. The decrease in Russian oil and gas revenues in the first month of summer is predicted by the Ministry of Finance in the amount of 44 billion rubles. In May, this “minus” amounted to almost a quarter less – 38.7 billion. The trend is extremely alarming for the entire Russian economy: the process of falling incomes is on the rise. The Ministry of Finance wants to stop it through the mass sale of petroyuan, but independent experts doubt its success.

It is possible that the final drop in income for June will be even greater. This is what happened in May: then the Ministry of Finance gave a forecast of minus 8.1 billion rubles, but in fact received a shortfall of 38.7 billion. What is the reason for such a rapid collapse in oil and gas revenues, which traditionally form the basis of all budget revenues? The answer lies on the surface: the tough sanctions adopted by the collective West against Russian oil and gas are working.

However, the Ministry of Finance itself prefers to explain what happened not by geopolitical, but by purely economic factors. He attributes the fall in oil and gas revenues to a new decline in the price of Russian oil. On average, in May, the main export domestic grade Urals fell by $5.3 per barrel, its price dropped to $53.4. In other words, Russian raw materials are still being sold at a price below the ceiling of $60 per barrel set by our “enemies”. And, of course, it falls far short of the price of $70.1 included in the federal budget. In annual terms, Urals generally fell in price by almost a third – in May 2022, the average cost of a barrel of this brand was $ 78.8.

At the same time, back in mid-May, Finance Minister Anton Siluanov said that there was “some problem” in lagging oil and gas revenues behind the plan. According to him, about 30% of the annual budget revenues and 39% of the annual expenditures were fulfilled for that period. However, the Minister of Finance expressed confidence that, taking into account the course of budget execution, the imbalance should be leveled. So far, as follows from the data of the Ministry of Finance itself, this has not happened. According to the results of the first four months of the year, the federal budget deficit has already exceeded 3.4 trillion rubles (recall: the government planned a deficit of 2.9 trillion for the entire year). Since the beginning of this year, budget revenues have decreased by 22.4% in annual terms, while expenditures, on the contrary, have increased by 26% compared to 2022.

The situation is extremely alarming for the entire Russian economy and for the country’s budget in particular. Of course, the Ministry of Finance is not going to look at it with folded arms. An increase in the volume of sales of foreign currency on the free market has already been announced. Starting from June 7, the government, as part of the budget rule, will withdraw yuan to the stock exchange in an amount equivalent to 3.6 billion rubles a day. In total, for the calendar month until July 6, 74.6 billion rubles worth of currency will be sold. But will the proposed measure help the budget?

Director of the Center for Economic Policy Research, Faculty of Economics, Moscow State University Oleg Buklemishev notes the fact that last year oil and gas revenues went through the roof, this year they were almost doubled. The reason for the expert is obvious – the fall in prices for raw materials on the world market, plus the difficulties experienced by Russian companies in exporting to world markets. “The sale of currency on the stock exchange has always been an auxiliary tool in order, on the one hand, to “mirror” oil and gas revenue operations, and on the other hand, to pursue a foreign exchange policy to manage the ruble exchange rate,” the economist says. According to him, this approach worked well in terms of the dollar and the euro. With the yuan, everything is not so blissful. “The end of yuan budget reserves, even in the National Wealth Fund, is not far off, if the same price situation continues,” Buklemishev believes.

Chief Researcher, Institute of Economics, Russian Academy of Sciences Igor Nikolaev for his part, he believes that these 44 billion rubles do not play a big role for the Russian economy as a whole. But the increase in the budget deficit, which has already exceeded the target for the whole year in 4 months, is an extremely negative factor. “These 44 billion will fall on the scales of the budget deficit, which has long gone beyond the planned, this is a component of its further increase,” the expert explains. And the excess of budget expenditures over revenues is always a risk factor. However, Nikolaev is convinced that, given the reserves of the National Wealth Fund and a certain stability of the economy, we will survive this year even in the face of a growing budget deficit. But the financial prospects for 2024 need to be thought about now, the economist urges.