March 2024

Follow the Money:
Understanding Russia’s oil
and gas revenues

Oxford Energy Comment

Vitaly Yermakov, Senior Research Fellow OIESIntroduction
Revenues from Russia’s oil and gas industry have long been one of the most important metrics forresearchers of the Russian economy. These revenues have accounted for between 30 to 50 per centof total federal budget revenues over the past decade, making them the most important single sourceof cash for the Kremlin. The Russian oil and gas sector contributes about 20 per cent of the country’s
GDP on average, with wide fluctuations due to global price cyclicality and - more recently - to trade
restrictions imposed by the West amid the conflict in Ukraine and Russia’s efforts to re-direct its oil andgas exports to new markets.1
With drastically reduced public information about the Russian energy sector, statistics on Russia’s
budgetary revenues from oil and gas from Russia’s Ministry of Finance are one of the few remaining
information sources for researchers. 2 These statistical series are released monthly and provide
information on the overall amounts and the composition of oil and gas revenues of the Russian budget
by tax type. Tracking the changes in value and the composition of the oil and gas state take is key tounderstanding and evaluating the state policies toward the sector and the overall state of Russia’s
economy. This report attempts to translate the numbers on Russia’s oil and gas revenues into
informative insights.

The context: resilience to sanctions through tough trade-offs
Russia may never be as strong as it looks, but neither is it as weak as it seems – and the country has
proven this throughout its difficult history. During the past decade Russia’s economy has demonstrated
remarkable resilience to external shocks. The crises have included the first round of sanctions and trade
restrictions in 2014-2015 after the Crimea takeover, dwindling oil prices in 2015-16 which hit Russia
hard, the contraction of demand amid the COVID-19 pandemic in 2020, and the ‘sanctions from hell’ in2022-23, following the current conflict inUkraine.
Russia’s default policy responses to the current external pressures have followed the recipe which has
proved successful for the economy during previous “perfect storms” , obviously with some modifications
as a result of lessons learned and also with the introduction of new policy elements designed to address
new challenges, technology transfer problems in particular. In very broad terms, the key goals of
Russia’s present economic strategy are as follows:Firstly, to achieve macroeconomic stabilization by means of currency depreciation to keep the statebudget in balance and help exporters remain competitive; secondly, to preserve Russia’s foreignexchange reserves, change their composition to reduce exposure to the US dollar and the euro, andavoid capital flight; thirdly, to implement import substitution policies to deal with the constraints resulting
from international sanctions, and, fourthly, to conduct counter-cyclical investment across the energy
value chain, while seeking to diversify the Russian economy away from dependence on hydrocarbons
over the long term. Russia’s overall anti-crisis policies can be characterized as state dirigisme overlaid
with elements of neo-liberal macroeconomic policies especially with regards to the exchange rate
policies and efforts to control inflation.
Trying to achieve all of these goals at the same time has proven problematic, with inevitable trade-offs
emerging between the policy of the weak ruble and inflation reduction targets, between reduced hardcurrency earnings and growing investment requirements, and between plans for self-sufficiency andcritical dependency on certain Western know-how and technologies. The availability and affordability ofadvanced technologies remains a problem and a potential drag on longer-term economic growth, but
in a situation where the Kremlin has decided to follow a ‘fortress Russia’ strategy, a policy favouring the1

https://www.statista.com/statistics/1322102/gdp-share-oil-gas-sector-russia/
https://minfin.gov.ru/ru/statistics/fedbud/oil?id_57=122094svedeniya_o_formirovanii_i_ispolzovanii_dopolnitelnykh_neftegazovykh_dokhodov_federalnogo_byudzheta_v_20182024_godakh
2

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

2

weak ruble and thus providing preferences to exporters at the expense of importers has been a difficult
but unavoidable choice.
Clearly, Russia has been struggling to address its dependency on imports of high-tech items andadvanced technologies but it has managed to secure the supply of the most needed inputs despite thesanctions introduced by the US, the EU, and their allies by relying on trade with the so-called ‘friendly
countries’, most importantly China but also intermediaries set up in the former CIS countries, Turkey,
and in the Middle East. In cases where technological solutions are unique, Russia has been trying tofind acceptable substitutes to the sanctioned items, sacrificing some efficiency for the sake of
expediency.
Oil and gas exports from Russia have been instrumental to its resilience as a means of financing social
obligations at home and purchasing critical foreign imports. In 2022-23, following the introduction of a
trade ban by the US and the EU, Russia managed to redirect its crude oil and refined product exports
to Asia which prevented a forced reduction in oil output.3 This in turn has secured a continuous flow of
oil revenues into Russia’s budget.
Table 1 contains the time series for selected key macro-economic indicators that illustrate the above
points.
Table 1: Russia - Selected macro-economic indicators

Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

GDP Growth,
percent
10.0
5.1
4.7
7.3
7.2
6.4
8.2
8.5
5.2
-7.8
4.5
4.3
4.0
1.8
0.7
-2.0
0.2
1.8
2.8
2.2
-2.7
5.9
-1.2
3.6

Inflation,
percent
20.1
18.8
15.1
12.0
11.7
10.9
9.0
11.9
13.3
8.8
8.8
6.1
6.6
6.5
11.4
12.9
5.4
2.5
4.3
3.0
4.9
8.4
12.0
7.4

Exchangerate, year
average,
RUR/USD
27.8
29.2
31.3
30.7
28.8
28.3
27.1
25.6
24.9
31.8
30.4
29.4
31.1
31.9
38.6
61.3
66.8
58.3
62.9
64.6
72.1
73.7
68.4
85.8

Federal
BudgetRevenues,
billion $
40.8
54.6
70.4
84.3
119.0
181.0
231.4
304.5
373.0
231.1
273.4
386.8
413.6
408.1
375.6
222.8
201.4
258.8
309.3
312.3
259.5
343.1
407.1
328.2

Foreign debt
as share ofGDP,
percent*
n/a
n/a
n/a
n/a
36
34
32
36
29
38
32
26
29
32
29
38
40
33
28
29
31
26
17
13

Foreigncurrency
reserves,
billion $**
12.5
28.0
36.6
47.8
76.9
124.5
182.2
303.7
478.8
426.3
439.5
479.4
498.6
537.6
509.6
385.5
368.4
377.7
432.7
468.5
554.4
595.8
630.6
582.0

Price of Urals
crude oilblend, $/bbl
26.2
22.8
23.7
27.2
26.8
50.6
61.1
69.3
94.4
61.1
78.2
109.4
110.5
107.9
97.6
51.2
41.9
53
70
63.6
41.7
69
76.1
63

*At the year end**At the year start. In 2022 the EU froze about $280 billion worth of Russia's currency reserves.

Source: Author, Rosstat, Central Bank of the Russian Federation, Ministry of Finance3

https://www.oxfordenergy.org/publications/russian-oil-output-increases-in-2022-amid-unprecedented-western-sanctionswhats-next/

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

3

To summarize, during the past decade Russia has supported its export-oriented industries when prices
have fallen, created conditions for import substitution in many domestic sectors that have not been
critically dependent on Western technologies and expensive equipment, and has kept inflation in check,at least so far.
Russia’s economy has performed relatively well as measured by GDP. Especially noteworthy is therobust GDP growth of 3.6 per cent reported by Rosstat for 2023, boosted by aggressive militaryspending and consumpion-led growth fueled by sharp increases in payments to military personnel
serving in the war zone and their families, as well as hikes in pensions and social payments. Moneysupply in Russia increased by 20.1 per cent in 2022 and 8.5 per cent in 2023, according to Russia’sCentral Bank, evidence of Keynsian-type policies implemented in a Russian style.4
Average GDP growth between 2010-2023 was around 1.9 per cent. For the period 2014-2023, however,it averaged a mere 1.1 per cent, significantly lower than the global average of 2.7 per cent. (See Figure
1)
Figure 1: Russia’s GDP, 2000-2023
7

5.9

6
5

4.5

4.3

4

3.6

4

Percent

3
2
1

2.8
1.8

1.8
0.7

2.2

0.2

0
-1
-1.2

-2
-3

-2
-2.7

-4

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Rosstat

Russia’s economic growth is expected to slow during 2024 but will remain on par with growth in its peergroup of developing countries. In its most recent January 2024 assessment the IMF raised its GDP
estimate for Russia this year to 2.6 per cent from its previous forecast of 1.1 per cent growth, citing thestrong stimulus in the form of government spending as the primary reason for the upgrade.5
The concern for the government, however, is the possibility of low percentage growth for Russia (muchlike the situation for many developed economies) during the next decade as compared to average world
economic growth and to rates of growth amongst its peer group of emerging market and developing
economies. This means that unless there is another spike in global commodity prices during the next
few years, Russia could fall behind its key international competitors in economic development and its
share of the world GDP could shrink.

45

https://www.interfax.ru/business/940002
https://www.ft.com/content/21a5be9c-afaa-495f-b7af-cf937093144d

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

4

The state giveth and the state taketh away: balancing monetary and fiscal
priorities
With the increased volatility of its export earnings in the past few years, Russia’s first-response actions
have focused on monetary policy instruments, namely keeping relatively high levels of government
spending and managing the budget deficit via a sharp depreciation of the ruble, thus increasing
proceeds from traditionally significant commodity exports.
The weak ruble had produced a miracle of import substitution in Russia’s food manufacturing industry
and agriculture by the middle of the 2010s as imported products became prohibitively expensive thus
giving domestic producers a booster shot. This successful import substitution for most food items by
the middle of the last decade became one of the most important factors in partially shielding the Russian
population from extremely high inflation levels during 2022-23 (food represents a major expense itemin the consumer basket for most Russian people). Inflation in 2023 was estimated at 7.4 per cent, amoderation after a spike to 12 per cent in 2022, compared to the historical lows of 3 per cent in 2019and 4.9 per cent in 2020.6
Another important factor in protecting the population from inflationary pressure has been the so-called‘inflation-minus’ tariff policy, under which state-regulated tariff hikes for gas, electricity, andtransportation each year remain lower than the expected inflation.
By way of adjusting to new economic realities, most Russian people with low and moderate incomes
have changed their consumer choices for basic necessities in favour of domestically produced goods
and services which turned out to be acceptable substitutes. The rich have maintained their lifestyleusing a wider spectrum of imported items, which they clearly can afford. As a result, the social contractholds for now, embedded in the legacy paternalistic expectations and historically high ‘pain threshold’of Russia’s population.
In addition to making sure that the macro-economic monetary policy maintains the overall level of staterevenues, the government has also used fiscal policies to protect the current and future tax take fromthe oil and gas sectors, the twin workhorses of the Russian economy. Fiscal adjustment has also helped
achieve other policy targets (most importantly, to keep retail petroleum prices at the pump fromescalating sharply). Many of these measures were designed and implemented before the sanctions
against Russia were introduced but also proved to be instrumental in shielding state revenues fromexternal pressure. The changes in the composition of the fiscal instruments that Russia applies to its
oil and gas sectors are presented in Figure 2.
Figure 2: The composition of Russian oil and gas revenues by type, 2018-2023
250

Billion US$

200
150
100

50
0
-50
2018

2019

2020

2021

2022

2023

"Negative" excise tax

Mineral Resource Extraction Tax (MRET)

Export duty

Additional Profits Tax (APT)

Source: Author, Ministry of Finance6

https://www.interfax.ru/business/940012

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

5The starting point for the latest round of petroleum tax reform was the need to address multiple
distortions that emerged from the tax treatment (or rather mistreatment) of the sector by the early 2010s.
Since the transition to a market economy in the 1990s, the Russian government has been using fiscal
instruments that relied on taxing the gross revenues of Russian oil producers – the so-called Mineral
Resource Extraction Tax (MRET) and the export duty (export tax). From a state perspective, theadministrative simplicity of these levies represented a clear advantage. The potential downside wasthat these levies did not take costs into account and thus could be detrimental for high-cost projects
and new developments.
To account for oil price cyclicality and in order to tax windfall price revenues, sliding scale formulae forboth MRET and the export tax were introduced, linked to the price of Urals crude on international
markets. When oil prices were high, the state tax take would increase to about 90 per cent, and whenoil prices were low, it would decline to shield producers and secure their minimum operating margins.
As long as the legacy of Soviet era investments could be relied on, this was a second-best but
reasonably rational trade-off for Russian planners to choose, and indeed the tax system worked
reasonably well and survived the global oil price crashes of 2009, 2015, and 2020.
Whereas mineral royalties are usually site-specific, the philosophy of the Russian MRET was of a ‘onesize-fits-all’ tax. Over time the Russian tax administrators have had to accept the reality: an oil
production tax should reflect the differences in project economics that are a function of site-specificmineral rents. The flip side of relying on a gross revenue type of taxation for Russian oil has been its
negative impact on the economics of many Russian brownfield sites and also on new big-ticket projects.
From a project development perspective the tax burden was all front-end loaded, and the distributionof risks favoured the state over producers.
Russia’s fiscal authorities had been reluctant to embrace the idea of a full-scale transition to oil taxes
that would be sensitive to costs or profits (a few early Production Sharing Agreements (PSAs) are
exceptions that prove the general rule) for a fear of tax base manipulation by oil companies. At thesame time, ad hoc state interventions to address the problems of non-performing oil fields wereincreasing and numerous exemptions and rate reductions to MRET flourished in Russia during the2010s. These primarily addressed the cases of depleted fields, and also new fields in regions that werelacking developed infrastructure. As Russia’s production base deterioated and more new fields werebrought into production, the share of assets that had different MRET exemptions reached almost 60
per cent by 2020. Indeed, Russia’s Ministry of Finance was concerned that by 2035 the output with
reduced rates of MRET would reach 90 per cent of the total. It was against this backdrop that the ideaof replacing ad hoc exemptions with a systemic solution in the form of the additional profits tax (APT)
started to gain traction.
The APT, a cash flow-based alternative to MRET for certain fields, was introduced in Russia on 1
January 2019, initially with limited application to a few pilot projects. In 2021 it was finally moved fromthe pilot stage to a more widespread application.. The tax rate was set at 50 per cent after deducting
production and transportation costs which resulted in a significant reduction in tax terms for maturefields, while taxes for new fields were slightly improved as well.7 The main advantage of APT from a
producers’ perspective was the immediate expensing of capital costs (in contrast to a lengthy process
of expensing via depreciation deductions under general taxation rules under the old system). In 2021
APT receipts reached USD 13.7 billion accounting for 11 per cent of all collected oil and gas federal
taxes, in 2022 USD 24.7 billion (15 per cent), and in 2023 USD 15.1 billion (15 per cent).
The importance of the introduction of APT and its growing role in the portfolio of fiscal instruments in
Russia is that the Russian government’s ability to be flexible and to recognize the need for providing
incentives to oil producers has been a vital element of oil production resilience in Russia in the past few
years. This is a definite improvement from a long-term planning perspective for Russian oil developers
as they move to the next generation of higher-cost projects that require investment incentives.
Another set of fiscal distortions in the Russian oil sector that had to be addressed during the 2010s was
related to the uneven tax treatment of the upstream and downstream sectors. This policy, an integral

7

https://www.nalog.gov.ru/rn77/taxation/taxes/ndd

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

6part of the so-called ‘tax manoeuvre’ has been designed to re-balance the tax burden and to reduce
the effective subsidy to the Russian downstream sector that went too far and lasted too long, resulting
in a net loss to the Russian economy.8 Under the plan, the differentiated export taxes on Russian crude
oil and various refined products were to be gradually phased out by 2024. At the same time, the MRET(the Russian equivalent of an upstream royalty) was to be increased to compensate for the shortfall
from the reduced export tax.
The policy of shifting the emphasis in the tax burden on the oil companies away from export taxes andto the MRET was designed and implemented well before the first sanctions against Russia wereintroduced in the wake of the Crimea takeover in 2014. But the measure has turned out to be handy for
the Russian state as the move has effectively shielded the state budget from the volume reduction ofexports of crude and refined products out of Russia. Since the tax base for MRET is extracted volumes,
the Russian government has ensured its tax base will not be affected by how much the companies areexporting, at least in the near term. The measure shifts the burden of adjustment to the external trade
restrictions on Russian exporters of oil and gas who arguably have greater flexibility than the federal
budget in adjusting their expenditure. Clearly, this does not solve the problem but merely extends it into
the future, when, as apparently the logic of the Russian government goes, Russia will be able to redirect
its export flows of energy to the so-called ‘friendly countries’.
It is the nature of complex tax systems that improving one element may result in cascading effects thatcreate undesirable outcomes in other parts of the system. To re-establish the balance, multiple
adjustments or the introduction of new elements is usually required. While export taxes for crude oiland refined products represented significant shares of value of export sales, they were simultaneously
acting as a wedge between petroleum prices in the global markets and the Russian domestic market,
effectively subsidizing Russian consumers of motor fuels. As the ‘tax manouevre’ was gradually phasingout export taxes, export parity levels increased,9 exposing the Russian domestic fuel market to global
price volatility and pushing up fuel prices in Russia (all other things being equal).
To regain some indirect control and to keep gasoline prices in the domestic market in check, in 2019
the Russian government decided to introduce a special mechanism of the so-called ‘negative excise
tax’ that effectively subsidizes Russian oil companies for keeping retail fuel prices at the pump relatively
stable (significantly lower than in Europe and moderately lower than in the US in hard currency terms)
even during oil price spikes in the global markets. The negative excise tax works as follows: when global
prices for petroleum are higher than the established threshold, the state effectively provides a subsidy
to the oil companies allowing them to keep wholesale product prices and retail prices at the pumprelatively unchanged. The amount of the subsidy is higher when global oil prices spike, so the state iseffectively sharing the price windfall with the industry on the condition that the industry behaves as a‘good citizen’ and does not pass higher prices on to the motorists. At the same time, the establishedthreshold made sure that the state take was sufficient for the budget even during a low oil priceenvironment. In 2020 oil prices were very low for most of the year due to global lockdowns and theresulting contraction of demand, so the effective subsidy only amounted to USD 3.1 billion. In the next
three years, amid higher global oil prices and the resumption of Russian petroleum exports, the negative
excise tax (the budgetary transfer to Russian refiners) grew robustly, to USD 7.7 billion in 2021, USD
14.3 billion in 2022, and USD 13.7 billion in 2023. As stated earlier, while not a perfect market solution,

8

See https://www.oxfordenergy.org/publications/russias-heavy-fuel-oil-exports-challenges-and-changing-rules-abroad-and-at-home/
Export parity principle is based on the concept of a producer being able to choose freely between selling their product to either the export ordomestic market. For producers in a net exporting country the equilibrium price will be equal to the international price minus all costs associatedwith the exports, such as transportation, customs fees, export duties, etc. If the export netback price is higher than the price in the domestic market,
exports will go up, reducing domestic supply and pushing up domestic prices, until the market clears. Russia’s export tax serves as a wedge
between international and domestic prices for crude oil and individual refined products. Therefore, changing the level of oil export taxes and therelative differentials has immediate consequences for domestic crude and refined product prices via the mechanism of the export parity priceformula. For example, reducing the export tax on crude oil would lead to much higher acquisition prices for Russian refineries and reduce theirrefining margin. Reducing the export tax on light refined products would increase domestic wholesale prices for gasoline and9diesel (and support the refining margin) but would quickly increase end-user prices at the pump and feed into overall inflation.

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

7the measure has become a second-best instrument for reining in inflation in Russia and exercising
control over politically-sensitive motor fuel prices.

Analyzing Ministry of Finance data
The previous section explaining the context of Russia’s economic developments in the past few years
and the evolution and changes in the composition of the Russian oil and gas take was a necessary
requirement to lay the groundwork before analyzing the Ministry of Finance’s time series for oil and gas
revenues.
As stated earlier, oil and gas revenues have been, and will remain, key to Russia’s overall economic
performance and resilience to crises. They accounted for over 50 per cent of Russia’s federal budget
revenues in 2011-2014, while during the low-price environment for oil and gas in 2016 this dependency
was reduced greatly to 36 per cent and only 28 per cent in 2020, but the situation was quickly reversed
when oil prices rebounded. An analysis of Russia’s federal budget revenues provides important
insights.
As can be seen from Figure 3, the continuing increases in state revenues after 2014 (with the exceptionof the pandemic-driven trends in 2020) have coincided with dramatic depreciation of the ruble. A weakruble has been a policy choice and has partially shielded the budget from exposure to highly cyclical
export revenue streams that are beyond the control of the Russian government.
Figure 3: Russia’s Federal Budget Revenues, 2000-2023
35000

100
90

Billion rubles

30000

80

25000

70

20000

60
50

15000

40

10000

30
20

5000

10
0

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

0

Oil&Gas

Other

Total

RUR/USD, R-scale

Source: Author, data from multiple reports by Russia’s Ministry of Finance

Another trend worth noting is the robust growth in non-oil and gas revenues that reached 19.4 trillion
rubles in 2023, double levels seen in 2014. In 2023, the year-on-year (y-o-y) growth in non-oil and gas
revenues of 19.2 per cent offset the y-o-y decline in oil and gas revenues of 20.2 per cent and ensured
an overall growth of federal budget revenues of 2.8 percent y-o-y. The composition of non-oil and gas
revenues has not been reported by Russia’s Ministry of Finance, but it is reasonable to assume that asignificant contribution came from the historically significant Russian exports of metals, petrochemicals,
and agricultural products and was also a function of the growing domestic economy and higher
proceeds from corporate and personal income taxes.
Yet another remarkable takeaway from the Figure 3 is the lessening role of oil and gas revenues as apercentage of the total federal revenues. While accounting for about 50 per cent of the total in 20112014, Russia’s federal budget revenues from oil and gas declined to 42 per cent in 2022, even amid an
extremely high energy price environment, and to only 32 per cent in 2023 (See Figure 4).

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

8

Figure 4: Share of oil and gas revenue in federal budget
60%
50%
40%
30%
20%
10%

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

0%

Source: Author, Ministry of Finance

Clearly, this is a result of the restrictions on Russian oil and gas exports since 2022. Russia has lostthe European gas market and has had to re-direct export flows of its crude oil and refined products
away from Europe and towards Asia. This dramatic change in logistical arrangements has resulted in
the need for significant price discounts necessary to build up new logistical chains, secure new markets,and lure new customers.
When measured in US dollar terms, revenues have been affected by the weakening ruble since 2014,
but have demonstrated a sustained revenue stream since then. In 2022 total federal budget revenues
amounted to USD 407 billion (including USD 170 billion from oil and gas), just a bit shy of the record
levels achieved in 2012-13 during USD 100+ oil prices. In 2023, amid lower prices for oil and gas andwith a further weakening of the ruble, total revenues declined to USD 333 billion, with the contribution
from oil and gas amounting to USD 108 billion (see Figure 5).
Figure 5: Russian federal budget revenue (USD)
450
400
350

Billion US$

300

250
200
150
100
50

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

0

Oil&Gas

Other

Total

Source: Author, Ministry of Finance

Suffice to say, the dollar values are useful as comparative indicators but are less relevant for assessing
the ability of the Russian government to meet its near-term budgetary targets which are set in rubles.
The data series from the Ministry of Finance presented in Table 2 allows comparison of the amounts

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

9needed by the state each year from the oil and gas industry in order to meet budgetary targets with theactual budgetary receipts from the industry.
Table 2: Base vs. extraordinary oil and gas revenue(billion Russian rubles)
Total oil and gas revenues
Base oil&gas revenues
Extraordinary oil&gas revenues
Purchases (Sales) of foreign currency and gold(billion US$)
Total oil and gas revenues
Base oil&gas revenues
Extraordinary oil&gas revenues
Purchases (Sales) of foreign currency and gold

20189017.84756.34261.44216.3

20197924.34967.42956.82936.62020
5235.25557.6-322.3-289.72021
9056.55889.53167.03107.02022
11586.1
6508.95077.41220.62023
8822.48000.1822.2
1022.3

143.4
75.6
67.7
67.0

122.6
76.8
45.7
45.4

72.6
77.0
-4.5
-4.0

122.9
79.9
43.0
42.2

169.5
95.2
74.3
17.9

102.8
93.2
9.6
11.9

Source: Author, Ministry of FinanceOne conclusion from the data in Table 2 is the changing trend: prior to 2023 the so-called ‘base’ revenue
from oil and gas (the contribution from the sector that the budget needs to be balanced) was significantly
lower than actual oil and gas revenues. The extraordinary revenues from oil and gas, that is the amounts
exceeding the base revenues, were used to build up reserves in the form of convertable currencies orgold and accumulated in a ‘rainy day’ fund. The story behind the numbers is budgetary austerity
embedded in very conservative oil and gas price assumptions used by Russia’s economic planners inmaking budgetary projections. The sterilization of extraordinary oil and gas revenues by way of holding
very significant foreign currency reserves was deemed necessary to avoid the negative effects of the‘Dutch disease’. The year 2020, the clear outlier in the set, was a year of global economic shocks when
the state had to compensate for a gap in revenue by selling some of the currency and gold reserves
accumulated during the ‘fat’ years, an example of counter-cyclical state intervention. Remarkably, in
2023 the projection for ’base’ oil and gas revenues was quite optimistic and very little extraordinary
revenue was generated. This change of approach was clearly motivatedby the EU’s freeze of close to
USD 280 billion, or almost half of Russia’s total hard currency reserves after the start of the conflict in
Ukraine. Now, instead of sterilizing a significant portion of available oil and gas proceeds abroad byconverting them into dollars and euros, the Russian government has decided to use the flow of export
revenues from oil and gas to increase budgetary spending in rubles.
Another factor worth noting is the key role of oil-related revenues for the Russian budget as opposed
to gas-related revenues. Oil exports matter because of money, gas exports matter because of influence:for many years this principle has been the cornerstone of Russia’s export strategy. Petroleum is afungible commodity which can be relatively easily redirected towards alternative markets if arbitrage
opportunies emerge. In contrast, pipeline gas usually locks in buyers and sellers in a long-term
relationship.
About 80 per cent on average of the total oil and gas take for the Russian budget during 2018-2023
accrued from the oil side (see Figure 6).10

For the purposes of this calculation MRET on condensate was assigned to ‘oil-related’ revenues in spite of the fact that mostcondensate in Russia is produced by Gazprom and Novatek whose main business is gas production. Gas condensate is often
referred to as ‘light crude oil’ and its marketing is similar to that of crude oil. The fungibility factor has been key to Russia’s
resilience to trade restrictions against its energy sector. Russian oil companies managed to re-direct the trade flows of fungible
petroleum products to alternative markets in a matter of a few months. In contrast, pipeline gas deliveries that depend on fixed
infrastructure are more vulnerable to trade embargoes since it takes years to build new pipelines.
10

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

10Figure 6: Monthly receipts: Oil versus gas
20
18
16

Billion US$

14
12
10
8
6
4
2

Oil-related revenues

Jan-24

Sep-23May-23Jan-23

Sep-22

May-22

Jan-22

Sep-21

May-21

Jan-21

Sep-20May-20Jan-20

Sep-19

May-19Jan-19Sep-18May-18Jan-180

Gas-related revenues

Source: Author, Ministry of FinanceAt the same time, the monthly revenue series demonstrate significant volatility and two relatively shortterm but significant outliers: the middle of 2020 and Q42022. In these instances, oil-related and gasrelated revenues were almost at parity, at minimum absolute levels in 2020 and close to maximum
absolute levels at the end of 2022. Each instance deserves a brief explanation.
The dwindling revenue from oil in 2020 under the double whammy of shrinking demand and low prices
amid the COVID-19 pandemic was the result of lockdowns and the drop in consumption due toextremely low activity in the global mobility sector. Russian oil revenues suffered from both volume andprice effects. In contrast, Russian gas exports to Europe declined only moderately in volumetric terms,
by about 5 per cent in 2020, in a situation when the competing LNG flows to Europe contracted sharply
amid very low prices.11 The decline in gas revenues in 2020 was primarily due to the negative pricedynamics. As a result, the shares of oil-related and gas-related contributions to the Russian budget
became almost equal in June 2020 at very low absolute levels.12
In 2022 the market pendulum swung back and energy prices increased, with gas prices in Europe
breaking historical records. The volumes of Russian gas exports were high in Q1 2022 but started to
decline rapidly after the start of the conflict in Ukraine. The price windfall momentum for Gazprom was
so strong, however, that the proceeds from gas exports in 2022 exceeded all expectations. The Russian
government, the majority shareholder in Gazprom with just over 50 per cent stake, was facing a
dilemma: whether to distribute record-level dividends to all shareholders or introduce an ad hoc
additional tax. It promptly chose the latter option, instructing the company not to pay dividends toshareholders in 2022 and denying other non-state shareholders their share of the growing pie.13 At thesame time, the Russian government approved a one-time hike in MRET for gas for Gazprom that was

11

For several months during 2020 gas prices in Europe fell below the levels of short-run marginal costs for US LNG plants
causing shut-ins.
12
Oil-related revenues still accounted for 56 per cent, and gas-related revenues for 44 per cent of the oil and gas take in June2022.
13
https://www.reuters.com/business/energy/gazproms-2022-net-profit-falls-1226-trillion-rbls-2023-05-23/

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

11effective between October-December 2022 and allowed the channeling of 100 per cent of windfall
profits into state coffers.
It is also worth noting that an additional factor creating increased volatility in monthly budgetary receipts
from oil and gas during 2021 to the present is due to a technicality: the fact that the additional profits
tax (APT) is paid on a quarterly basis while other taxes are paid monthly (see Figure 7).
Figure 7: Monthly composition of Russia’s oil and gas revenues

Source: Author, Ministry of Finance

The Western decision to cut imports of Russian energy in 2022 was a tremendous challenge to theestablished energy trade. For Russia, the near-term shock of having to re-direct the flows of its energy
exports to different markets and find alternative customers has been softened by the price windfall as
global prices for all fossil fuel commodities, including oil, coal, and especially natural gas have been
robust during the past year. Russia’s export revenues in 2022 set historical records, helping to financethe transition to new export schemes. But in terms of redirecting volumes to new markets the story of
Russia’s fungible oil and refined product exports has been markedly different from the story of Russia’s
infrastructure-constrained pipeline gas exports.
Russia has managed to quickly find alternative markets for its crude oil and refined products in Asiawith relatively minor financial losses. It had to meet its share of the production cuts agreed within
OPEC+ but exports of crude are not subject to quotas. Russian crude oil and condensate production in
2022 was 535.4 million tonnes, and exports amounted to 242 million tonnes (about 4.9 mbd). In 2023
Russia produced 530.6 million tonnes of crude and condensate and exported 234.3 million tonnes.
According to Alexander Novak, Russia’s First Deputy Prime-Minister in charge of the energy complex,
Asia-Pacific accounted for 82 per cent of Russian exports of liquids in 2023, suggesting a
successfuldiversification strategy away from Europe, formerly the key market for Russian crude andproducts, achieved in record time.14
This pivot has been facilitated by the Kremlin’s tacit acceptance of a reduced tax take, at least
temporarily, as a significant portion of the oil price windfall has been retained by the exporters (andused to build new logistical chains to Asia) at the expense of the Russian budget in the first half of2023.15 Compared to former exports to Europe, the netbacks to the exporters on the new trade routes

14

https://www.interfax.ru/business/944802
That was primarily due to the use of international price benchmarks for Russian crude (the quotations for Urals crude as definedby Argus that lost their relevance in the new conditions) rather than the actual sales prices in the statutory tax formulae
15

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

12and rents for the Russian state are lower due to longer transportation distances, complicated logistics,
and price discounts to new customers but, on balance, Russia’s ability to sustain and protect its nichein the global crude and product markets despite unprecedented trade restrictions could be considered
an important achievement. It has allowed Russia to avoid a forced reduction of oil output, defying theearlier pessimistic expectations by many a market watcher.
But the situation with Russian pipeline gas is markedly different. Having lost access to most of thepipeline export infrastructure to the European gas market in 2022, Russia had to drastically reduce its
gas output and consequently increase its spare productive capacity. Russian gas output fell
dramatically, from 763 bcm in 2021 to 676 bcm in 2022 (an 11 per cent drop y-o-y) and further to 638
bcm in 2023 (a 6 per cent drop y-o-y). In 2023 Russian pipeline gas exports to Europe (excluding
Turkey) declined to about 25 bcm, a far cry from about 150 bcm achieved in 2021. Conversely Russia
increased its pipeline gas exports to China via Power of Siberia in accordance with the planned ramp
up of deliveries to 22.7 bcm in 2023 from 15.1 bcm in 2022. Pipeline deliveries to Turkey were close to
23 bcm in 2023, about the same as in 2022.
Despite the loss of Europe’s gas market, Russia’s net oil and gas revenues in 2023 remained almost
unchanged from pre-crisis levels of 2021. They clearly declined relative to the records set in 2022, butthat year was an outlier owing to high oil prices and the unprecedented hikes in gas prices. But asstated above, gas-related revenues have not been key to the overall level of Russia’s oil and gas take.
As can be seen from Figure 8, most of the revenues come from the oil side in the form of MRET for oiland condensate, additional profits tax, and export duties on crude oil and refined products.
Figure 8: Annual oil and gas revenues by tax and industry
250

Billion US$

200
150
100
50
0
-50
2018

2019

"Negative" excise tax
MRET - Condesate
Export duty - Refined products
Export duty - Natual gas

2020

2021

2022

2023

MRET - Oil
Export duty - Oil
Additional Profits Tax (APT)MRET- Natural gas

Source: Author, Ministry of FinanceIn 2021 the budgetary receipts from natural gas (MRET and export tax) amounted to USD 23.1 billion,
representing 19 per cent of total net oil and gas revenues. In 2022 the contribution from gas spiked to
USD 51.2 billion, representing 30 per cent of the net total, and in 2023 it normalized at USD 20.8 billion,
or 20 per cent of the net total. Moreover, the bulk of gas revenues now comes from MRET on naturalgas, while the budgetary contribution of the export tax from pipeline gas exports has bottomed out at
USD 6.6 billion, a mere 6 per cent of the net total.

determining the tax obligations of Russia’s oil producers. Currently, the Russian government is considering different options formodifying the calculation mechanisms in the Russian oil and product taxes that would protect the state’s tax take and introduce
a new balance of interests between the state and the hydrocarbon producers.

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

13

In summary, Russia’s budget has been secured by fiscal revenues from the oil business, and Russia’s
oil production has been sustained by its success in redirecting crude oil and refined product exports
from Europe to Asia.

Conclusion
In the absense of previously available statistical series from Russia’s oil and gas sectors, the data on
the oil and gas revenues of the Russian federal budget regularly released by the Ministry of Financeprovides up-to-date information on the tax take in Russia’s oil and gas industries and allows for indirect
evaluation of the trends in these key sectors of the economy. The stories behind the numbers reveal
Russia’s budget resilience to external shocks through flexible fiscal policies and creative adaptation to
the changing conditions. They also support the notion of ‘bending, not breaking’ industry performance
under the pressure of the sanctions.
In the short term Russia has been much more robust than many expected. Many questions remain,
however. How sustainable are Russian macroeconomic and fiscal policies in the medium term? Howlong can the government support last and where will the finance for new projects come from? What willbe the medium term impact of a weaker ruble on inflation? What could the impact of slower technology
development be on the segments of the oil and gas industry that require the application of advanced
technological solutions, (for example, in LNG business)? Will the new reliance on China and India as
primary export markets for Russian oil and gas provide sufficient profit margins for the Russian
exporters? While all these questions are beyond the scope of this paper, they represent key signposts
for monitoring Russia’s future economic performance.

The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the
Oxford Institute for Energy Studies or any of its Members.

14