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Russia’s Oil and Gas Revenue Soars 41% Amid Sanctions and Economic Strain

Proceeds from oil and gas sales for Russia’s federal budget rose by around 41% year-on-year in the first half of the year to 5.698 trillion roubles ($65.12 billion), finance ministry data showed on Wednesday, driven by rising oil prices and a weaker rouble.

Oil and gas revenues have been the most significant single source of cash for the Kremlin, accounting for approximately a third to a half of total federal budget receipts over the last decade.

The military conflict in Ukraine has led the West to impose multiple sanctions aimed at reducing Russian oil and gas income, which makes up about a third of the country’s federal budget. Despite these sanctions, the price of Russia’s flagship Urals blend averaged $69.1 per barrel in the first half of the year, above the Western-imposed price cap of $60, and up from $52.5 in the same period of 2023. Concurrently, the rouble weakened to an average of 90.8 per dollar, compared to 76.9 in January – June 2023.

Russian President Vladimir Putin has praised the country’s economic growth, claiming it outpaces that of Western economies. The economy grew by 3.6% in 2023 following a revised 1.2% contraction in 2022. However, Russia-based economists have pointed out that the growth quality is poor, with increased production of missiles and shells contributing to higher GDP but offering limited benefits to the population.

For 2024, the government has budgeted for federal revenue of 10.7 trillion roubles from oil and gas sales, a 21% increase from 2023. Weaker oil prices and reduced gas exports had previously cut revenue by 24% in 2023.

Russia has significantly increased defense and security spending since launching its “special military operation” in Ukraine in February 2022, leading to two consecutive annual deficits exceeding 3 trillion roubles, about 2% of GDP. These deficits have been financed through internal borrowing and by drawing on the National Wealth Fund (NWF).

($1 = 87.5000 roubles)

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