- Russia’s February oil and gas revenues jumped by over 80% from a year ago.
- The increase comes despite sanctions imposed on Russia for its invasion of Ukraine.
- Russia managed to circumvent sanctions and maintain revenue, most recently by activating a price floor mechanism.
Russia played a card that nearly doubled its energy revenues ahead of the presidential elections later this month.
In February, Russia raked in 945.6 billion rubles, or $10.4 billion, in oil and gas revenues, according to data from the country’s Finance Ministry published on Tuesday. That’s compared to 521.2 billion rubles in February 2023.
This means the energy giant’s takings from oil and gas jumped over 80% from a year ago, according to Bloomberg’s records. In particular, levies on crude and petroleum products more than doubled over the same period.
The bumper takings for Russia are particularly striking because the country is still facing extensive Western sanctions over its war in Ukraine, which is now in its third year.
How is Russia still making so much money off oil?
The extra revenue Russia raised in February came from higher taxes on domestic oil producers.
Russia already had a mechanism in place that would allow it to tax oil producers at a higher rate, it just wasn’t using it. Russia applied the price floor for January oil sales and started receiving those taxes in February, Bloomberg reported on March 1, citing a letter from Russia’s Federal Tax Service.
Moscow’s decision to activate the price floor came after the price of Russia’s flagship Urals crude fell due to tougher sanctions enforcement by the West.
Russia is an energy major, with one-third of its revenue coming from oil and gas. The European Union, Russia’s single largest customer before the war, has spent the past two years trying to wean itself off Russian oil and gas to squeeze the Kremlin’s war chest.
A G7-led price cap of $60 a barrel on Russian oil also helped keep a lid on prices and the Kremlin’s oil revenues.
However, the G7’s restrictions do not restrict anyone from buying the products as long as they do not use Western insurance and shipping services, and Moscow has managed to pivot its customer base eastward toward countries like India and China.
Russia also managed to get around the price cap and sanctions by using a huge “dark” fleet of aging ships, and by using intermediaries to “launder” its oil.
Elections coming up this month
The West is tightening trade restrictions against Russia to force the Kremlin to halt its war in Ukraine. The US and EU are imposing controversial secondary sanctions on companies outside their legal jurisdictions to force compliance.
The moves are keeping Russia on its toes: Kremlin spokesperson Dmitry Peskov admitted to issues with Chinese bank transactions in February.
However, President Vladimir Putin’s regime needs to continue portraying stability as Russians themselves may be running out of patience as the war drags on.
Russia’s oil revenues don’t fund only the war. The money also goes to social spending that Putin has promised Russians before he heads to the polls later this month.
Russia’s presidential election is slated to take place over three days from March 15 to March 17. Putin is expected to win the election against three opponents.
