Russian budget boosted by oil prices and China exports say experts

The Russian Ministry of Finance announced that state budget revenues from taxes were 21 percent higher last month than in August 2023. Bloomberg reports that this is due to the increase in the price of Russian "black gold" and rising exports to China.

Taxes in August contributed 778.6 billion rubles ($8.7 billion) to Russia's budget, representing a 21 percent increase. Bloomberg emphasizes that the gas and oil industry is primarily responsible for this.

The agency reports that this is due, among other things, to the higher price of Urals crude oil. A year ago, it cost $64.21 per barrel; now, it is $74.01. Another factor influencing this is the growing export of gas to China. According to Bloomberg's calculations, it increased by nearly 33 percent year over year.

Judging by the tax data alone, one might conclude that the Russian economy is financially better off than before the invasion of Ukraine and subsequent sanctions. However, experts see this issue differently. They point to, for example, the deepening problem of inflation, which caused the central bank to raise interest rates in July from 16 to 18 percent.

War, isolation, sanctions, reorientation to China, and a gigantic labor force deficit – these are strong inflationary factors, assessed Vladimir Milov. He explained that the huge amounts of money going to the Russian arms industry drive inflationary pressure but not the economy. The expert pointed out that money invested in the arms industry does not translate into economic growth because it does not generate added value or stimulate new production chains.

An analyst from Yale University, Michał Wyrębkowski, recently warned to approach data on the Russian economy with great skepticism, even—and perhaps especially—if it comes from the International Monetary Fund.

Media outlets such as Bloomberg, "The Economist," and "The Financial Times" use data from the International Monetary Fund (IMF), and since Russia is still part of it, the data is as Russia wants it to be seen, noted the expert. Therefore, in his opinion, misunderstandings arise when assessing economic indicators from a large amount of data, such as GDP.

The expert pointed out that Moscow sells oil even when it is not profitable because if they stopped, they would not be able to resume production due to the lack of Western technology.