Russia's Oil, Gas Revenues Fall Over 35% Amid Sanctions, Economic Strain

Russia's oil and gas revenues have sharply declined, falling by 35% year-on-year in May to 512.7 billion roubles ($6.55 billion) due to weakening global oil prices and Western sanctions, significantly impacting the Kremlin's budget which heavily depends on fossil fuel proceeds. The Finance Ministry projects a further budget deficit increase in 2025, raising the deficit estimate amid prolonged low oil prices and a 53% month-on-month revenue drop from April. OPEC+ plans to raise oil output by 411,000 barrels per day from July, a move Russia opposed but ultimately compromised on, complicating its efforts to stabilize revenues. The Russian economy is also facing recession risks, with high inflation and record 21% interest rates straining businesses and slowing growth to 1.4% in early 2025, down from 4.5% in late 2024. Western sanctions have cut off European markets for Russian energy, forcing reliance on India and China, while Russia has lost an estimated $450 billion in energy revenues, further exacerbating economic instability and forcing increased defense spending that now exceeds social spending for the first time in post-Soviet history. The Kremlin is also considering raising industrial gas prices to manage the fiscal shortfall caused by the energy revenue collapse.