Russia Adjusts Budget Rule to Enhance Financial Stability Amidst Dropping Oil Revenues

The Russian government plans to gradually reduce the oil price threshold used for revenue calculations under its “budget rule” in an effort to make the nation’s finances less susceptible to fluctuations in the energy market and Western sanctions, Finance Minister Anton Siluanov announced on Thursday.

Currently, revenues from oil and gas exceeding $60 per barrel of Urals crude are funneled into Russia’s National Wealth Fund (NWF), while any shortfalls are compensated by withdrawing from this savings fund.

To address this year’s widening budget deficit, which has been driven by substantial defense expenditures, the government intends to withdraw approximately 447 billion rubles ($5.39 billion) from the NWF, which has an estimated total of 4 trillion rubles ($48.25 billion).

Siluanov indicated that the set oil price threshold will be decreased by $1 each year starting in 2026, ultimately reaching $55 per barrel by 2030.

“We need to strengthen the budget to ensure it can adapt to any restrictions we encounter,” Siluanov remarked during the Moscow Financial Forum.

He did not clarify whether this adjustment would persist in response to future fluctuations in oil prices.

In August 2023, Russia essentially discontinued its budget rule, more than a year after the onset of its full-scale invasion of Ukraine. Bloomberg first reported in May that officials were contemplating a reduction of the oil price threshold.

Siluanov has been advocating for revisions to the budget rule since the spring, when Urals crude prices fell below $60 per barrel. Meanwhile, the draft budget for 2025 anticipated an average price of Urals at $69.70 per barrel.

The government is currently preparing for a federal budget revision later this month to better align with its “socio-economic policy priorities.”

According to Reuters estimates, Russia’s oil and gas revenues for the period from January to September are expected to decrease by 20.5%, amounting to around 6.62 trillion rubles ($79.58 billion), primarily due to dropping global prices and a stronger ruble. September revenues alone are projected to fall by 23% to 592 billion rubles ($7.1 billion).

Siluanov stated that this new threshold would reduce the proportion of energy revenues in the 2026 budget to 22%, down from 25% during the first eight months of this year.