Rising Oil Prices Not Enough To Balance Russia's Budget Reuters

(MENAFN- UkrinForm) Ukrinform reports this, citing Reuters article.

Russia is facing a growing federal budget deficit due to lower-than-expected oil and gas revenues, which account for nearly a quarter of budget income.

Although global oil prices on Tuesday jumped above $83 per barrel, Russian oil is trading at a discount compared to the international benchmark Brent, worsening the situation with oil revenue inflows. According to Reuters calculations, the average discount in February amounted to $26.50 per barrel.

The outlet notes that Russia is forced to sell its oil at a discount mainly due to Western sanctions imposed over its war against Ukraine, as well as the EU price cap set at $44.10 per barrel from February 1.

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Russia’s state treasury has already been depleted by massive defense and security spending since the launch of its full-scale war in Ukraine.

According to Reuters calculations, the price of Russia’s Urals crude would need to rise by more than 50% from $46.13 (RUB 3,582) per barrel, the level reached on March 2, in order to meet the budget’s planned targets.

Russia’s 2026 budget assumes an oil price of RUB 5,440 per barrel, or $59, and an exchange rate of RUB 92.2 per U.S. dollar. Conversely, if oil prices remain stable, the ruble would need to weaken from its current 77.65 to 117.5 per dollar to balance the budget.

Kirill Tremasov, adviser to the head of the Russian central bank, said on Saturday that the central bank does not expect a collapse of the ruble and that the rise in oil prices may be short-lived. “Therefore, the government is focusing on ​a long-term ⁠forecast, not on what will happen in the next week or month,” he told journalists.

Russia’s budget deficit could nearly triple compared to the official figure by the end of this year, as declining oil sales and increasing discounts reduce revenues while expenditures may exceed forecasts.

The Russian budget projects RUB 8.92 trillion in oil and gas revenue this year, but the current pace of inflows is lagging behind this target, the outlet concludes.

As Ukrinform previously reported, analysts at the U.S.-based Institute for the Study of War (ISW) noted in a recent report that Iranian threats to ships passing through the Strait of Hormuz have led to a significant rise in global oil prices, which could alter the downward trend in Russia’s oil revenues.

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