Ukraine Dealt a Painful Blow to Putin's Oil 'Trough' — Expert

Russia's oil market has declined, and the Kremlin is trying to hide the energy crisis. Official claims of a 37% rise in oil and gas revenues in July turned out to be a statistical anomaly. According to analyst Vitaliy Shapran, the real state of the industry is deteriorating: without the one-time tax and the damping mechanism, revenues collapsed by 35.3%.

Russia's oil market has declined, and the Kremlin is desperately trying to hide the energy crisis. Official claims by Russian authorities about a successful 37% increase in oil and gas budget revenues in July compared to June turned out to be a statistical anomaly. According to financial analyst Vitaliy Shapran, the real state of Russia's oil industry is deteriorating. The formal revenue figure for July was recorded at 934 billion rubles, but about 396 billion rubles of that amount came from a one-time quarterly tax on additional income (NDD). This payment reflects the financial results of oil companies from previous months, when world oil prices spiked amid the regional conflict around Iran. If July figures are stripped of the one-time tax, operational revenues amounted to about 539 billion rubles, which is immediately 21% lower than the previous month's results. An additional factor in the decline was the damping payments to oil workers, which nearly halved to 113 billion rubles. The state is forced to allocate these subsidies to support refineries that constantly suffer from systematic attacks by Ukrainian drones. A combined calculation shows that, excluding one-time quarterly accruals and the damping mechanism, real budget revenues from oil and gas collapsed by 35.3%. In August, economic pressure on the Russian treasury will only intensify. Support from the quarterly NDD is exhausted, and the estimated price of Russian oil will continue to fall following a 6.3% reduction in the base tax price to $59.02 per barrel. Amid falling export revenues, the Kremlin will have to find colossal funds for emergency reconstruction of damaged refineries and planned autumn repairs, which will inevitably accelerate the depletion of budget reserves.