Falling oil prices, abnormal strengthening of the ruble and tightening of Western sanctions have hit the raw materials "heart" of the Russian economy.
The net profit of companies producing oil and gas fell almost by half in the first quarter of 2025, Rosstat reported. Over three months, oil and gas corporations, on which every third ruble in the budget depends, earned 789.5 billion rubles against 1.445 trillion a year earlier.
The profitability of oil refineries dropped to almost zero. Over the quarter, oil product producers earned 4.5 billion rubles - 95.7%, or 23 times less than a year earlier.
Overall, the raw materials industry, which provides 14% of Russian GDP and half of budget revenues, lost 38% of its net profit: 1.098 trillion rubles against 1.759 trillion in the first quarter of last year.
Oil companies' accounts are emptying as oil prices fall: if in January a barrel of Russian Urals was sold abroad at $66, then by the end of March the price had dropped to $59, and by the end of May to $52. This has dropped foreign exchange earnings from oil exports to a 2.5-year low of $1.2 billion per week, according to Bloomberg.
Then the Russian budget "cracked at the seams": in May, its oil and gas revenues collapsed by 34%, and the deficit for five months was almost three times higher than the Finance Ministry's initial plan - 3.4 trillion rubles against 1.2 trillion.
Tightening Western sanctions — with the blacklisting of new “shadow fleet” tankers and the reduction of the “price ceiling” from $60 to $45 per barrel — promises “difficult times” for oil companies and pain for the budget, write experts from the Institute of Energy and Finance.
There are already 426 tankers under sanctions — half of the Kremlin’s “shadow fleet,” and most of these vessels have been cut out of the global oil trade. But Russian oil, while it costs less than $60, is being transported by Greek shipowners, who will refuse to transport it if the “price ceiling” is lowered. If the United States joins the European decision to lower the price ceiling, “a significant reduction in seaborne oil exports from the Russian Federation is likely” and “an even greater reduction in oil revenues in the second half of this year,” writes the IEF. The treasury may lose 800 billion rubles in oil and gas revenues, estimates Freedom Finance Global analyst Vladimir Chernov.
Against the backdrop of falling prices, oil companies will try to reduce dividend payments in order to leave more for the development of companies in the conditions of expensive loans, but the authorities will oppose this, believes Igor Yushkov from the Financial University under the Government of the Russian Federation.
“There are many problems that force the management of companies to at least be cautious (with payments), and on the other hand, the state, where they have a share, in order to close the hole in the budget, which is growing, and will lobby for increased dividends so that more money reaches the budget,” explains Yushkov. He does not rule out that the government will consider increasing the tax burden on oil companies in order to cover the treasury deficit.
The net profit of companies producing oil and gas fell almost by half in the first quarter of 2025, Rosstat reported. Over three months, oil and gas corporations, on which every third ruble in the budget depends, earned 789.5 billion rubles against 1.445 trillion a year earlier.
The profitability of oil refineries dropped to almost zero. Over the quarter, oil product producers earned 4.5 billion rubles - 95.7%, or 23 times less than a year earlier.
Overall, the raw materials industry, which provides 14% of Russian GDP and half of budget revenues, lost 38% of its net profit: 1.098 trillion rubles against 1.759 trillion in the first quarter of last year.
Oil companies' accounts are emptying as oil prices fall: if in January a barrel of Russian Urals was sold abroad at $66, then by the end of March the price had dropped to $59, and by the end of May to $52. This has dropped foreign exchange earnings from oil exports to a 2.5-year low of $1.2 billion per week, according to Bloomberg.
Then the Russian budget "cracked at the seams": in May, its oil and gas revenues collapsed by 34%, and the deficit for five months was almost three times higher than the Finance Ministry's initial plan - 3.4 trillion rubles against 1.2 trillion.
Tightening Western sanctions — with the blacklisting of new “shadow fleet” tankers and the reduction of the “price ceiling” from $60 to $45 per barrel — promises “difficult times” for oil companies and pain for the budget, write experts from the Institute of Energy and Finance.
There are already 426 tankers under sanctions — half of the Kremlin’s “shadow fleet,” and most of these vessels have been cut out of the global oil trade. But Russian oil, while it costs less than $60, is being transported by Greek shipowners, who will refuse to transport it if the “price ceiling” is lowered. If the United States joins the European decision to lower the price ceiling, “a significant reduction in seaborne oil exports from the Russian Federation is likely” and “an even greater reduction in oil revenues in the second half of this year,” writes the IEF. The treasury may lose 800 billion rubles in oil and gas revenues, estimates Freedom Finance Global analyst Vladimir Chernov.
Against the backdrop of falling prices, oil companies will try to reduce dividend payments in order to leave more for the development of companies in the conditions of expensive loans, but the authorities will oppose this, believes Igor Yushkov from the Financial University under the Government of the Russian Federation.
“There are many problems that force the management of companies to at least be cautious (with payments), and on the other hand, the state, where they have a share, in order to close the hole in the budget, which is growing, and will lobby for increased dividends so that more money reaches the budget,” explains Yushkov. He does not rule out that the government will consider increasing the tax burden on oil companies in order to cover the treasury deficit.
