Bigger hole than expected: Putin’s budget is getting out of control


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Bigger hole than expected
Putin’s budget is getting out of control

Already after the first two months of this year it can be estimated that Russia is threatened with an even larger budget deficit than expected. The budgeted deficit has almost been reached. The main problem for the Russian treasury is the slump in oil and gas revenues.

Russia is threatened with an even larger budget deficit this year than feared anyway. The Russian state budget already shows a deficit of 2.581 trillion rubles (32.3 billion euros) after the months of January and February, according to the Russian news agency Interfax. That is already almost 90 percent of the deficit of 2.925 trillion rubles (36.6 billion euros) planned for the year as a whole.

Brent crude oil 85,70

In the same period last year, Russia had achieved a surplus of 415 billion rubles (5.2 billion euros). The main problem for the Russian budget is the slump in oil and gas revenues. According to preliminary calculations by the ministry, these have fallen by almost half. According to the Ministry of Finance, this is mainly due to the lower oil price and the fall in exports of natural gas.

As of this Monday morning, a barrel (159 liters) of North Sea Brent for delivery in May cost 85.33 US dollars. However, because of the war of aggression waged against Ukraine by Kremlin chief Vladimir Putin, the western industrialized countries have imposed a price cap on Russian crude oil and now also on oil products from Russia. Urals oil is therefore trading at a significant discount. According to media reports, Moscow is only getting rid of its Urals oil at an average price of around $50 a barrel.

After the West turned away from Russian oil and gas, the head of the International Energy Agency (IEA), Fatih Birol, sees Russia permanently weakened. “Russia has lost the energy battle,” Birol told the French newspaper Liberation in Paris. Oil and gas exports have fallen by 40 percent since Russia’s war of aggression against Ukraine began.

And that’s just the beginning, because the Russian oil and gas fields are technically and geologically complex. They needed the technological support of international experts. “However, they withdrew from Russia.” Since the fields did not receive the necessary technological support, production will decrease in the medium term.

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