NewsOil boom fuels Russia's war chest despite sanctions and global outcry

Oil boom fuels Russia's war chest despite sanctions and global outcry

War in Ukraine. Russia finances the invasion with oil. In the photo Vladimir Putin.
War in Ukraine. Russia finances the invasion with oil. In the photo Vladimir Putin.
Images source: © Getty Images | Contributor

3:33 PM EDT, May 13, 2024

Starting in 2024, Russia has seen a notable rise in budget revenues from its oil and gas sales, attributed to increased barrel prices and heightened taxes on the extraction sector. Consequently, this financial boost allows the Kremlin to persist in funding the conflict in Ukraine, as reports state.

Biznesalert.pl, citing sources like "Kommersant," the Russian consulting firm RBK, and neftegaz.ru, disclosed that from January to April 2024, the revenue reached 4.157 trillion rubles (nearly $45.4 billion based on the current exchange rate), marking an 82.2 percent increase from the previous year.

The War in Ukraine and the surge in Russia's budget revenues

The reports evaluate that this significant revenue boost is primarily due to the surge in oil prices and a one-time tax payment for extraction. In addition to these factors, Bloomberg pointed out the impact of a weakening ruble, which has assisted Russian fiscal bodies in estimating higher budgetary inflows.

The price hike is especially seen in the Urals variety of oil, which recently hit $73 a barrel—a noticeable jump from $50 a year ago. This increase came despite the price cap imposed by the G7 and the European Union on oil exported by Russia. Despite the rising price, Brussels maintains that sanctions are effective.

The extraction tax, which Moscow increased for the duration of the conflict, is paid quarterly by companies in the sector—in March, April, July, and October. Consequently, tax revenues surged to 3.8087 trillion rubles (about $41.5 billion), nearly doubling.

Therefore, Russia's total budget revenue for the first four months increased by roughly 50.1 percent year-on-year to 11.684 trillion rubles. Meanwhile, budgetary spending rose to 13.168 trillion rubles (up by 21.5 percent from the previous year), leading to a deficit of 1.484 trillion rubles. However, this shortfall is offset by the National Wealth Fund, supported by surplus hydrocarbon sales.

The War in Ukraine takes its toll on Gazprom

The war's financial demands on the extraction sector have taken a toll on Gazprom. The gas powerhouse faced a loss of 629 billion rubles in 2023, marking its first such downturn since 1999.

In response to this historic loss, Gazprom has started to offload major assets in Moscow and its surrounding areas, including "office buildings on Stroiteley Street, the Imperial Park Hotel & Spa complex in Pierwomajskoje settlement, non-residential premises on the first floor in the building on Nowoczeremuszkińska street, and a 96-car parking facility near its main headquarters in Moscow," as themoscowtimes.com reported.

The corporation attributes these sell-offs to "the completion of the Gazprom Group companies' change of venue to Saint Petersburg."

The War in Ukraine. India's defiance against the Kremlin

Recent developments have shown that India's stance has been less than favourable for the Kremlin. Negotiations regarding the settlement of substantial overdue payments for Russian oil have stretched over a year without success, as none of Moscow's proposals have come to fruition, according to "The Hindu Businessline."

"The funds of Russian companies will remain in India," states the report, quoting a well-placed source.

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