Russia’s budget could receive more than $65 billion in additional revenue this year thanks to the rise in oil, a key export commodity, bringing new financial strength to Moscow amid the threat of Western sanctions.
Prices would need to stay around their current levels of around $90 a barrel this year to boost revenues by that much, economists estimate. If “black gold” reaches a price of $100 a barrel, which some say will not be the ceiling, the amount will jump to nearly $73 billion. That would bring the total dollar value of Russian revenues close to the peak of a decade ago.
Bloomberg Economics estimates that the increase could be as high as $80 billion at an oil price of $100 a barrel.
In roubles, the amount could be even higher as the currency has weakened against the dollar on fears of possible sanctions over the crisis over the Ukrainian border. Either way, Russia is expecting a very strong year for its oil and gas revenues in rubles – 9.5 trillion rubles and that’s with the price of the commodity at 62 dollars. More expensive gas in Europe, Russia’s main market, could boost revenues further.
“Russia’s fiscal position is so hyper-stable that even with more modest oil prices it’s hard to compromise it in the current situation,” says Sophia Donets, an economist at Renaissance Capital in Moscow.
Oil’s performance is a significant turnaround from two years earlier, when prices collapsed at the start of the coronavirus pandemic. The price of Russia’s main export commodity in the past few weeks has reached levels last seen in 2014, when the U.S. and allies imposed their first restrictions over the annexation of Crimea.
As the law stands, the bulk of the proceeds will go to Russia’s National Welfare Fund, most of which is stored in gold and currency from the central bank. But some of the money could be used for infrastructure and investment projects to support growth, even if sanctions weigh on investment flows. The government currently plans to spend about 2.5 trillion rubles from the fund on projects over the next few years.