Falling energy revenues and rising costs left Russia with a federal budget deficit of 1.76 trillion rubles ($24.78 billion) in January, while sanctions and the cost of Moscow’s military campaign in Ukraine are choking the economy’s outlook, Reuters reported.

Russia pumps oil for export for less and less moneyPhoto: DreamsTime / Dmytro Melnikov

Citing preliminary data, Russia’s Finance Ministry said on Monday that oil and gas revenues fell 46.4% to 426 billion rubles in January compared to the same month last year, largely due to lower Ural oil prices. and a decrease in natural gas exports.

Revenues not related to oil and natural gas decreased by 28 percent and amounted to 981 billion rubles, due to a decrease in domestic VAT and income tax.

In general, budget revenues for the month fell by 35.1%, and expenses in January 2023 increased by 58.7% to 3.12 trillion rubles, which already exceeds 10% of the annual spending plan.

Moscow relies on oil and gas revenues – about 11.6 trillion rubles last year – to finance its budget spending and has been forced to start selling international currency reserves to cover a deficit stretched by the conflict in Ukraine.

How sanctions affect Russia’s budget

While some Russian officials have sought to play down the effectiveness of price caps and embargoes on Russian energy exports, Finance Minister Anton Siluanov said last year that capping Russian oil prices could increase the budget deficit in 2023.

As a result of the sanctions, Moscow has been forced to sell energy at a deep discount, and while the 2023 budget is based on a crude oil price of $70.10 a barrel, the average price of the main Russian blend in January was $49.48. per barrel, which is 42% less than in January 2022.

On Monday, the ministry said it was studying ways to switch to an alternative price indicator for tax purposes as the Urals oil price becomes less representative of Russian oil export prices.

The January deficit is already 60 percent of the annual plan of 2.93 trillion rubles, and analysts expect the deficit to widen to more than 5 trillion rubles if current conditions persist.

The main sources of covering Russia’s budget deficit are domestic borrowing, which it sharply increased in the last quarter of 2022, and revenues from accumulated energy revenues.

The ministry said on Monday that the National Welfare Fund (NWF) is worth $155 billion, Reuters reported.