The Russian government is considering lowering the oil price level above which it sends the proceeds to its wealth fund as the Kremlin’s oil and gas revenues are plummeting with widening discounts and key buyers like India pulling out of the spot market.
Under the so-called budget rule, Russia had a baseline price of $60 per barrel of oil for 2025. At prices above $60 per barrel for its oil, Moscow funnels excess revenue to its National Wealth Fund, a rainy-day reserves fund.
However, when the price is below $60 per barrel – as Russia’s crude grades have been for months now – Russia taps into the fund to offset shortfalls in revenue from oil and gas exports.
Despite the recent rise in international benchmark prices, Russia’s crude is selling at significantly lower levels, as discounts have widened in recent weeks. Russian crude is offered at discounts of more than $11 per barrel below Brent quotes for shipments to China, which has remained the main market for Russia’s oil following the massive withdrawal of Indian refiners.
Russia now is rushing to save its revenues and budget amid plunging income from oil sales.
“Oil and gas revenue really is falling [as a share of overall budget revenue]. We see this and the Russian government is thinking of tightening the fiscal rule by lowering the cut-off price to keep the National Wealth Fund intact and to ease pressure on the currency market,” Russian Finance Minister Anton Siluanov said.
The government could make the decision to lower the price of oil in the budget rule within two weeks, the local Interfax news agency quoted the minister as saying.
Last year, the government decided gradually reduce the cut-off price for oil in the fiscal rule by $1 each year, from $60 per barrel in 2025 to $55 by 2030.
Officials are now considering slashing that price to as low as $45-$50 per barrel, sources with knowledge of the plans told Bloomberg, adding that the government could also cut the economic growth estimate for 2026 amid the major hit to oil revenues.
By Tsvetana Paraskova for Oilprice.com
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