Russia’s oil and gas export revenues fall to 16-year low

Over the first 9 months of this year, the share of oil and gas revenues in the federal budget fell to its lowest level in the last 16 years and amounted to just over 28%. This was reported in the analytical note of the Accounts Chamber of the Russian Federation. The question arises: is this good for the domestic economy or bad? On the one hand, experts have long been calling for its removal from the “oil” needle. On the other hand, the budget has now become deficit, and not surplus, as before.

According to the Accounts Chamber, in absolute terms, oil and gas revenues to the treasury decreased over the year by 2.9 trillion rubles, to 5.58 trillion. The document notes that such a decrease was recorded in Russia only in the pandemic year of 2020. Then the export of energy resources brought our treasury 29% of revenues – still slightly more than in the three quarters of this year. However, during that period, the world economy took a deep time out and simply curtailed its activities and went into quarantine.

Auditors of the Accounts Chamber explain the reasons for the current decline by a decrease in the average price of Russian Urals oil and our natural gas, as well as a tax maneuver in the oil and gas industry. As a result, the rates of export customs duty on oil and petroleum products were halved compared to 2022.

For some reason, the impact of the anti-Russian sanctions that were imposed on our country after the start of the SVO is not indicated. Perhaps the main goal of this sanctions blow from the West was the desire to reduce Moscow’s income from oil and gas exports.

One way or another, willingly or unwillingly, it can be stated: Russia is getting off the oil needle; revenues from hydrocarbon exports, compared to the same period last year, fell by 15%. We can probably say that we are no longer the same raw materials power that we were just two years ago. During the period from January to September, non-oil and gas budget revenues (from other areas of activity) increased by almost 3 trillion rubles, to 14.16 trillion.

The domestic economy, as we see, has proven that it cannot live on oil alone. How long will this stabilization last? And how comfortable is our economy without an oil “safety cushion”? We asked the chief researcher at the Institute of Economics of the Russian Academy of Sciences, Doctor of Economic Sciences Igor Nikolaev, about this.

– Do the data from the Accounting Chamber indicate that we have gotten off the oil needle?

– 28% of oil and gas revenues is significantly less than previous values, but there is no need to delude yourself. How can we assume that the remaining 72% ensures the independence of the budget from oil and gas revenues.

– That is, we have not yet completely and finally eliminated such dependence?

– 28% – in any case, this is quite a lot, almost a third of the budget. However, it is not worth saying that we need to reduce this indicator by hook or by crook. If our country is rich in oil and gas, then why not use such a competitive advantage? It is necessary to proceed from the experience of other producing countries – Norway, Saudi Arabia, the United Arab Emirates – which have risen thanks to their hydrocarbon reserves. But again, the experience of these countries shows that it is necessary to actively develop other sectors of the economy.

– Which ones, for example, can become profitable for Russia?

– Grain should become our second oil. We are already exporting billions of dollars worth of it. In general, the agro-industrial complex has good prospects for exporting our milk powder; it is in demand around the world. Its volumes also amount to billions. It is necessary to develop other non-oil and gas industries.

– But if we talk not about the future, but about today. How dangerous is a drop in oil and gas revenues for our economy?

– It has already turned into a federal budget deficit for us. His situation is better than initially expected. For the next three years, the annual deficit is planned to be around 1% of GDP. It shrinks, but remains. For the time being, it can be compensated for by increasing budget expenditures – for example, from the National Welfare Fund. But if the hole in the treasury grows, expenses will have to be cut. In a short period of time, the economy is not able to restructure itself structurally, especially if it was previously based on petrodollars.

– Will the decline in oil and gas revenues continue in the near future? Or have we reached rock bottom?

– There are factors that influence this indicator. For example, oil prices may continue to fall. Plus, there are restrictions and secondary sanctions on our export capabilities. It cannot be ruled out that these factors will further reduce our country’s oil and gas revenues.

However, the government is making great efforts to redirect raw material exports to Southeast Asian countries. If infrastructure opportunities appear there, the share of income may increase.