Russia's Oil Revenue Plummets to Two-Year Low Amid Global Price Slump

June 4, 2025, Moscow - Russia’s oil and gas revenues, a cornerstone of its state budget, sank to their lowest level since June 2023 in May, driven by a sharp decline in global crude prices and a stronger ruble. According to Finance Ministry data, oil-related taxes fell 32% year-on-year to 430.4 billion rubles ($5.5 billion), while combined oil and gas revenues dropped 35% to 512.7 billion rubles.

The downturn, exacerbated by U.S. President Donald Trump’s tariff policies and OPEC+’s accelerated production increases, has forced Russia to triple its 2025 budget deficit forecast to 1.7% of GDP. As the Kremlin grapples with mounting economic pressures, the decline in oil revenue threatens its ability to sustain high defense spending and fund its ongoing war in Ukraine.

Global Oil Prices Hammer Russian Budget

The global oil market has been rocked by a combination of U.S.-led trade tariffs and OPEC+’s decision to ramp up production. Brent crude prices fell to $60.23 per barrel in May, a four-year low, down 20% since April, driven by fears of a global economic slowdown. Russia’s Urals crude, a key export blend, averaged $54.76 per barrel in April, 25% below the previous year and under the G7’s $60 price cap for the second consecutive month.

This price slump, coupled with a 10% stronger ruble at 83.317 per U.S. dollar, has slashed revenues when converted to domestic currency. The Finance Ministry now projects 2025 oil and gas revenues at 8.32 trillion rubles, a 24% reduction from earlier estimates.

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OPEC+ Output Surge Sparks Tensions

OPEC+’s decision to accelerate production hikes, with a 411,000 barrel-per-day increase planned for June, has deepened the oil price decline. Russia, a key OPEC+ member, expressed dissent at a recent meeting, as the output surge, led by Saudi Arabia, risks oversupplying an already saturated market. Russia’s oil production in 2024 was 516 million tons (10.32 million barrels per day), down 2.8% from 2023 due to OPEC+ quotas.

Despite calls for compliance, countries like Kazakhstan and the UAE have exceeded their targets, complicating efforts to stabilize prices. Analysts warn that sustained low prices could push Urals crude to $40 per barrel by 2026, threatening Russia’s fiscal stability.

Did You Know?
Russia’s National Wealth Fund, used to cover budget deficits, has dwindled to 3.3 trillion rubles (1.5% of GDP) as of March 2025, down from 7.7 trillion rubles in 2022.

Economic Strain and Policy Responses

The revenue drop has intensified Russia’s budget challenges, with the 2025 deficit now expected to reach 1.7% of GDP, up from an initial 0.5% target. Defense spending, set to rise 25% in 2025 to 6.3% of GDP, remains untouchable, forcing the government to tap reserves and consider tax hikes. In April, Russia began selling foreign currency from its National Wealth Fund, which holds 3.3 trillion rubles (1.5% of GDP), to cover shortfalls.

Lower oil prices also reduced subsidies to domestic refiners, with May payments dropping to 42.5 billion rubles, the lowest since October 2023. However, high interest rates and inflation, projected to hit 10% in 2025, add further strain, with some analysts forecasting stagflation or even a banking crisis if prices fall below $40 per barrel.

Domestic Criticism and Economic Outlook

Igor Sechin, CEO of Rosneft, Russia’s largest oil producer, has criticized the central bank’s strong ruble policy, arguing it exacerbates revenue losses by reducing crude prices in rubles. The Bank of Russia, focused on curbing inflation, maintains a record-high key interest rate, drawing scrutiny from industry leaders.

With oil and gas accounting for 30% of federal revenues, a prolonged price slump could force spending cuts or increased borrowing. Forecasts suggest Russia’s GDP growth will slow to 1.6% in 2025 from 4.3% in 2024, with risks of a deeper economic downturn if global trade wars intensify.