By John Q. Hosedrinker 
Russian tax revenues from oil and gas are projected to plummet by 46% in January 2024, hitting approximately 420 billion rubles, the lowest level since August 2020. This decline is attributed to a stronger ruble and low global oil prices. The market has become oversaturated due to factors such as reduced demand from major economies and the U.S. trade war with China. Western sanctions, including those imposed by the EU and the Trump administration, are further impacting Russia’s energy revenues, especially with reduced European imports and the need to offer discounted oil to new markets.
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Russia’s oil, gas revenues to drop by 46% in January year-on-year, Reuters reports, and that’s the headline we’re dissecting today. This is based on calculations by Reuters, looking at the anticipated impact on Russia’s federal budget from taxes on oil and gas. A decrease of nearly half is significant, and it’s primarily fueled by a couple of key factors: the global oil price being lower than it was, and the Russian ruble being stronger against other currencies.
Now, let’s break down the details. The ruble-denominated price of Russian oil, which is used for tax calculations, took a serious tumble in December, dropping by 53% year-on-year, to 3,073 rubles per barrel. Simultaneously, the ruble itself strengthened. The exchange rate jumped by over 30% compared to the same period the previous year. This combination is hitting the revenue numbers hard.
Of course, a drop of 46% is what we’re told officially, but some analysts might argue that the real impact is even more substantial. It’s a sentiment of, “those are rookie numbers, we want to see more damage.” And let’s not forget the context. This all comes back to the ongoing war in Ukraine, and the sanctions imposed on Russia as a result of it.
Considering the ruble’s strength, it creates a slightly more complex picture. Russia is, in effect, getting fewer rubles from their oil sales. However, those rubles can now buy more goods. This is because the ruble is worth more in international markets than it was previously. They can purchase the equipment needed from countries like China and Iran for its military. So, while the immediate revenue figures look grim, it’s not quite as simple as “the sky is falling.” The impact of a stronger ruble has to be considered.
And even if we ignore the exchange rate altogether, the drop in oil prices is still a major problem for Russia. The lower prices are directly affecting the revenue from oil sales. This is a very significant factor in the overall equation, and it can’t be easily dismissed.
The calculations are coming from Reuters, which is a trusted source for economic data, and not directly from the Russian government. They do a solid job estimating export figures. This adds some credibility to the estimates.
It’s tempting to categorize this development as “catastrophic,” which is a word that really underscores the severity of the situation. Some might suggest it is a fitting description of this situation.
The fact that Russia’s currency is settling most transactions in rubles (except for some trades with China in yuan) because of the restrictions from Western exchanges plays an important role. A stronger currency makes your exports relatively more expensive for international buyers. Higher prices often lead to fewer sales, as it’s becoming more expensive for international customers to buy Russian oil.
Let’s imagine it this way: Russia sells oil for X rubles per barrel. If the ruble appreciates 10% against your currency, the oil is now effectively 10% more expensive for you to buy, even if the price remains the same in rubles. In global markets, oil prices are typically tracked in USD, and these prices are adjusted according to the exchange rate. So, when the ruble rises against the dollar, Russia receives fewer dollars for each barrel sold. The Russian federal budget, operating in rubles, is feeling the pinch.
Another important point: Reuters’ calculations assume that Russia is selling roughly the same amount of oil as last year. But their export volumes have actually been increasing after a major drop in 2022. This could mitigate the impact of the price and currency issues to some extent.