Putin's Commodity Economy Is Cracking At The Seams
- 10.06.2025, 20:03
Profits of oil and gas companies have collapsed by half.
Falling oil prices, abnormal strengthening of the ruble and intensified Western sanctions have hit the raw materials "heart" of the Russian economy.
Salary profit of oil and gas companies in the first quarter of 2025 fell by almost half, Rosstat reported. In 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, reports The Moscow Times.
The profitability of oil refineries has fallen to almost zero. During the quarter, oil product producers earned 4.5 billion rubles - 95.7%, or 23 times less than a year earlier.
The raw materials industry, which accounts for 14% of Russia's GDP and half of budget revenues, lost 38% of its balanced profit: 1.098 trillion rubles against 1.759 trillion rubles in the first quarter of last year.
The accounts of oil companies are emptying as oil becomes cheaper: while in January a barrel of Russian Urals was sold abroad at $66, by the end of March the price had fallen to $59, and by the end of May - to $52. This has dropped the foreign currency earnings from oil exports to the lowest level in 2.5 years - $1.2 billion a week, according to Bloomberg.
After that, the Russian budget "cracked at the seams": in May, its oil and gas revenues collapsed by 34%, and the deficit for five months almost tripled the original plan of the Ministry of Finance - 3.4 trillion rubles against 1.2 trillion rubles.
The tightening of Western sanctions - with the blacklisting of new tankers in the "shadow fleet" and the lowering of the "price ceiling" from $60 to $45 per barrel - promises "hard times" for oil companies and pain for the budget, experts at the Institute of Energy and Finance wrote.
The sanctions already have 426 tankers - half of the Kremlin's "shadow fleet" - under sanctions, and most of these vessels have been cut from the global oil trade. But Russian oil, as long as it costs less than $60, is carried by Greek shipowners, who will give up shipping if the "price ceiling" is lowered. If the United States joins the European decision to lower the price ceiling, "a tangible reduction in Russian maritime oil exports is likely" and "an even greater reduction in oil revenues already in the second half of this year," the IEF writes. The treasury may lose 800 billion rubles of oil and gas revenues, estimates Freedom Finance Global analyst Vladimir Chernov.
With prices falling, oil companies will try to reduce dividend payments in order to leave more for the development of companies in conditions of expensive loans, but this will be opposed by the authorities, says Igor Yushkov of the Finance University under the Government of the Russian Federation.
"There are a lot of problems, which makes company management at least 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 higher dividends so that more money reaches the budget," Yushkov explains. He does not rule out that the government will consider increasing the tax burden on oil companies to cover the treasury deficit.