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By Brendan Cole
Senior Reporter
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Oil prices in Russia remain below government targets, according to Reuters, adding pressure on an already turbulent wartime economy.
Russia's oil blend is more than 11 percent below the Russian government budget target, the news agency reported, citing as a factor, the strong ruble, the country's currency.
Price issues with Russia's most lucrative export come amid a rise in the country's budget deficit and a worker shortage fueling high inflation.
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Newsweek has contacted the Russian finance ministry for comment.
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Why It Matters
Fossil fuel revenues form the backbone of Russia's economy, which has been buffeted by sanctions following Vladimir Putin's full-scale invasion of Ukraine.
But measures tackling Russian energy exports, including imposing a $60 price cap on seaborn oil, have been largely circumvented by Moscow's shadow fleet, which is a target of further EU sanctions.
However, Russia's budget, which has earmarked record levels of military spending, is facing increasing pressure as oil prices dip as a result of global economic uncertainty and increased output from OPEC+ oil producing countries.
What To Know
Reuters reported the average price in the Russian currency of Russia's oil blend calculated for taxation purposes, was 4,701 rubles ($60.01) per barrel in the first two weeks of July.
This was in keeping with June's level but 11.1 percent below the updated government targets of 5,281 rubles per barrel. The dollar denominated price is set at $56 per barrel.
Reuters said the lower oil price was largely the result of the rising ruble, which has increased by about 45 percent this year, in part because of tight monetary policy by Russia's Central Bank.
It comes as Russia's finance ministry grapples with an increased budget deficit which reached 3.69 trillion rubles ($47.31 billion), in the first half of 2025, the same as expected for the whole year, Reuters noted.
This has been driven by Putin's spending plans for the military as he continues his aggression in Ukraine, with defense outlays increasing by a quarter this year to 6.3 percent of GDP, the highest level since the end of the Cold War.
The Russian economy faces a sharp slowdown with coal mines, the construction industry and car manufacturers among sectors that have reported temporary shutdowns and transitioned to shorter working weeks.
Boris Grozovski, an expert on the Russian economy at the Wilson Center told Newsweek earlier in July that Russia's military sector continues to grow because it is financed by increased spending levels but output is declining in civilian industries and the government has a difficult decision over whether to continue prioritizing defense spending.
What People Are Saying
Reuters reported on Wednesday that "the average Russian oil price calculated in rubles has stayed below the federal budget's target for 2025."
Boris Grozovski, an expert on the Russian economy at the Wilson Center, said: "There is no extra money in the budget — it all went to the war effort. Therefore, in recent months, the government has also been trying to save money for the war. Overall, the government has a difficult decision to make."
What Happens Next
Russia's oil revenues will face increasing pressure from lower global prices. Adding to concerns for Moscow is the prospect of new sanctions being considered by the EU that would include a reduced oil price cap.
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