The budget is threatened with underfilling – Newspaper Kommersant No. 1 (7446) of 01/09/2023

The average December price of Urals crude of just $50.5 per barrel, announced by the Finance Ministry on January 5, looks frighteningly low for the new budget, calculated on the basis of $70.1 per barrel. The December two-year low and the $60 price ceiling imposed on Russian oil supplies are noticeably lower. According to the scenarios of the Ministry of Finance, maintaining the price of $50 in 2023 with production of 10 million barrels per day will reduce the expected oil and gas revenues by a quarter, by 2.1 trillion rubles. So far, the Ministry of Finance promises to refrain from a new increase in taxes in case of aggravation of budgetary problems. According to Bloomberg, a one-time withdrawal of excess profits from coal miners and fertilizer producers, as well as an increase in the budget share in the dividends of state-owned companies, may become a variant of their partial solution.

The average price of Russian grade Urals oil in 2022 was $76.09 per barrel, the Ministry of Finance calculated. Despite the fact that this is slightly less than the $80 that the department expected this fall, this result is the best for the budget and oil companies over the past eight years. In 2014, a barrel of Urals cost an average of $97.6, the next three years – almost half as much, in 2018 the price rose again – to $70.1, then there was a new two-year decline, in 2021 it was $69 per barrel.

Such a final oil price in 2022, combined with “gas” taxes that have grown strongly even with a drop in supply volumes, ensured a noticeable increase in oil and gas revenues.

According to the results of 11 months, they were in a significant plus, amounting to 10.655 trillion rubles, 30% more than in January-November 2021. There are no results for 12 months yet, but, according to the Treasury, as of December 29, 2022, all federal budget revenues, including non-oil and gas, amounted to 27.488 trillion rubles, by 2.5 trillion rubles. more than the level of 25 trillion rubles approved by law. This, however, does not mean a budget surplus, because the annual expenditures of the state treasury in 2022 increased even more. As informed On December 27, 2022, Finance Minister Anton Siluanov, “up to 30 trillion rubles. plus,” so that the budget will end up with a deficit of about 2% of GDP. Given the gloomy spring forecasts, this outcome looks quite favorable.

The situation with the 2023 budget looks somewhat different so far. It was drawn up with the same deficit — 2% of GDP and with an average annual Urals price of $70.1 per barrel. The current price of oil is much lower. Message dated January 5 Ministry of Finance informed that in December a barrel of Russian oil cost an average of only $50.47.

This is the lowest since December 2020. A month earlier, in November, the price of oil was already falling (at that time it was $66.47), but the decline was not so sharp.

The beginning of 2022 recall, for Urals it was different – the February price of $92.2 was the highest since October 2014. Then, during the year, a downward trend prevailed, because due to the military operation of the Russian Federation in Ukraine, it became more difficult to sell Russian oil – this has to be done at a significant discount. In December, after several months of decline, it rose to 38% of the price of Brent, which last month cost $81.27 per barrel. The growth of the discount is associated with the expansion of sanctions: from December 5, the European Union stopped accepting Russian oil transported by sea, and the EU, the G7 countries and Australia introduced a price ceiling for such oil at $60 per barrel. In response, we recall that Vladimir Putin, by his decree, from February 1, 2023, prohibited Russian oil companies from selling oil under contracts containing a mechanism for fixing its marginal price (see “Kommersant” dated December 28, 2022).

It is clear that while maintaining the current prices for Urals, there is no particular practical sense in applying the ceiling.

Much more important are the budgetary consequences in the event that the price situation persists or worsens. In the “Guidelines for the Budget, Tax, and Customs Tariff Policy for 2023–2025,” the Ministry of Finance provided a scenario analysis of the dependence of oil and gas revenues on the price of oil and the volume of its production. Let us explain that, according to the adopted law on the budget-2023, they are expected in the amount of 8.939 trillion rubles. Of these, 8 trillion rubles. should amount to basic oil and gas revenues, that is, the minimum required by the government, established by the new budget (corresponds to the cut-off price raised from $45 to $62-63 per barrel).

According to the scenarios of the Ministry of Finance, at a price of $50 per barrel and a production volume of 10 million barrels per day (b / d), oil and gas revenues will amount to 6.8 trillion rubles, or 2.1 trillion rubles. less than expected.

According to Rosstat, in November, oil production was 9.8 million b/d (according to the OPEC + agreement, Russia could produce 10.5 million b/d). In December, Deputy Prime Minister Alexander Novak estimated a drop in production at the beginning of 2023 due to restrictions of 500-700 thousand b/d. So, with the same $50 per barrel and a reduction in production to 9 million barrels per day, the reduction in oil and gas revenues from the plan will already be 2.9 trillion rubles.

Anton Siluanov at the end of December acknowledged the risks of the budget deficit growing in 2023 in excess of the planned 2% of GDP due to the oil price ceiling. According to him, the receipt of foreign exchange earnings will depend on the demand for oil and the extent to which Russian exporters will find new markets. The budgeted sources of replacement of lost revenues are known – these are the NWF and loans. However, according to the agency Bloomberg, in mid-December, the government was already discussing a new revenue mobilization, including, among other things, a one-time withdrawal of income from coal miners and fertilizer producers, as well as higher dividends from state-owned companies. It should be noted that the Ministry of Finance promises not to change the tax “rules of the game” during the year, but earlier the ministry hinted at a possible increase in the burden on the commodity sectors with a high level of profit.

Vadim Visloguzov