Higher Oil Prices Do Not Save the rf’s Budget from a Drop in Revenues

The sharp rise in oil prices in September did not result in a corresponding increase in revenues for russia’s budget. The kremlin is forced to return a significant portion of the taxes collected to oil companies to compensate them for the costs of supporting the domestic fuel market.

In September, gross revenue from oil and gas taxes totaled approximately $10.16 billion. After compensation payments and tax deductions, only $5.28 billion reached the budget – by 22.3% less than in the same month of 2025. The government effectively returned nearly half of the collected funds to the sector.

Payments under the fuel price cap rose the most – from $2.30 billion in August to $3.56 billion in September. This represents a 55% increase over the month and is the highest amount since April 2022.

High oil prices only increase the amount of such compensation. The more profitable is the sale of oil on foreign markets, the greater the difference with domestic prices, which the government compensates to fuel producers.

The situation is exacerbated by a decline in petroleum product production. Due to a fuel shortage, the kremlin is restricting its exports and increasing imports. In August–September, maritime shipments of petroleum products to the rf totaled approximately 350,000–370,000 tons per month. Compensation has also been extended to imported fuel, shifting the additional costs to the federal budget.

From January through September, the rf’s oil and gas budget revenues fell by 17.2% year-on-year to $63.82 billion. At the same time, oil companies received approximately $25.7 billion in compensation.

Against this background, the ministry of finance of the rf lowered its forecast for oil and gas revenues for 2026 to $88.4 billion – by 14.5% less than the previous estimate. Over the first nine months, the budget received about 72% of the new annual target.

For the russian budget, the problem is no longer just the price of oil. Declining refining volumes and fuel shortages are forcing the kremlin to spend more and more to prop up the domestic market. If disruptions at refineries continue, high oil prices will not offset these costs, and the oil and gas sector will remain a source of increasingly weak budget revenue.