By Darya Korsunskaya and Alexander Marrow
MOSCOW (Reuters) – Slumping energy revenues and soaring expenditure pushed Russia’s federal budget to a deficit of 1.76 trillion roubles ($24.78 billion) in January, as sanctions and the cost of Moscow’s military campaign in Ukraine choke the economy’s prospects.
Citing preliminary data, Russia’s finance ministry said oil and gas revenues were 46.4% lower at 426 billion roubles in January than in the same month last year, which it put down primarily to lower prices for Russia’s Urals blend and lower volumes of natural gas exports.
Overall, budget revenues for the month were down 35.1%, while spending was 58.7% higher in January 2023, at 3.12 trillion roubles.
Moscow relies on income from oil and gas – last year around 11.6 trillion roubles – to fund its budget spending, and has been forced to start selling international reserves to cover a deficit stretched by the cost of the Ukraine conflict.
While some Russian officials have sought to downplay the efficacy of price caps and embargoes on Russian energy exports, Finance Minister Anton Siluanov said last year that a price ceiling on Russian oil could widen the budget deficit in 2023.
As a consequence of sanctions, Moscow has been forced to sell energy at a large discount. The average price of Russian Urals oil in January was $49.48 a barrel, down 42% on January 2022, the finance ministry has said.
“Given the decreased representativeness of the Urals oil price as an objective price indicator for export prices of Russian oil at the present time, approaches to switching to an alternative price indicator for tax purposes are currently being studied,” the ministry said in a statement on Monday.
Russia’s main sources of covering the budget deficit are domestic borrowing, which it stepped up sharply in the final quarter of 2022, and its rainy day fund of accumulated energy revenues.
On Monday, the ministry said the National Wealth Fund (NWF) stood at $155 billion, with 38.5 billion roubles worth of Chinese yuan and gold spent in January to cover the deficit.
($1 = 71.0320 roubles)
(Reporting by Darya Korsunskaya and Alexander Marrow; Editing by Andrew Heavens and Gareth Jones)
