Russia’s budget surplus for 2022 has almost evaporated after a sharp drop in energy exports during August led to a monthly deficit of as much as Rbs360bn ($5.9bn).
Russia recorded a surplus of almost Rbs500bn in the first seven months of the year. But the cumulative total fell to only Rbs137bn last month, suggesting a big deficit in August which economists attributed to sharp declines in oil and gas revenues. Russia’s surplus over the first six months of the year reached Rbs1.37tn as it built a war chest on the back of soaring energy prices.
Russian gas flows to Europe have dwindled to about one-fifth of pre-invasion deliveries. In early September it said it would keep Nord Stream 1, which runs under the Baltic Sea to Germany, shut indefinitely unless the west lifted sanctions imposed over Moscow’s invasion of Ukraine.
The price of oil, which contributes even more than gas to Russia’s budget, has also declined sharply since June. International prices have slid from around $120 a barrel to below $100. Russia has also had to discount its oil further to encourage new buyers such as India to take barrels that once would have gone to Europe.
In addition, the bounceback of the Russian currency since the immediate aftermath of the invasion has had an impact on how many roubles have been generated by oil and gas sales, which are normally priced in dollars or euros.
The sharp deterioration of Russian state finances comes as its army is being routed in northeastern Ukraine in its biggest military setback since losing the battle for the capital Kyiv in March.
Oil and gas revenues, which make up almost half of the budget revenues received so far this year, were down 18 per cent year-on-year over the January-August period, according to the data.
The EU has also banned imports of Russian coal. An EU ban on shipped Russian crude imports is due to come into effect in December.
Non-oil and gas revenues also fell drastically, by 37 per cent year on year, in January-August, the data showed.
Russia initially showed resilience in weathering the impact of punitive measures, including a freeze on half its foreign exchange reserves.
But Russia’s state gas monopoly Gazprom said earlier this month that production fell by 15 per cent year on year in the first eight months of the year. Exports, which flow mostly to Europe, were down by more than a third.
Revenues look set to worsen following Russia’s suspension of Nord Stream 1, one of its main gas pipelines to Europe, in early September.
Russia’s economy shrunk 4.3 per cent in July 2022 compared with the same month a year earlier, according to the country’s economy ministry. Analysts at Aton, a Russian brokerage, expect the economy to contract by a further 5 per cent in 2023 because of falling energy output.
Russia’s central bank voiced caution on the economic outlook in a report published last week on the regional economy, noting that exports were likely to slide.
The central bank is set to meet on Friday for a decision on interest rates.
Monetary policymakers raised rates to a record 20 per cent and introduced capital controls to quell an attack on the rouble in the days that followed the outbreak of war. Borrowing costs have been gradually lowered since then, and now stand at 8 per cent.
Additional reporting by David Sheppard