Kremlin confirms it is reviewing oil revenue rule change amid Iran war windfall

Kremlin spokesperson Dmitry Peskov has confirmed that Russia is reconsidering plans to tighten its fiscal rules, as rising oil prices caused by the war in Iran continue to benefit Russia’s budget calculations, Russian business news outlet RBC reported on Tuesday.

The Kremlin statement came a day after Reuters reported that a planned lowering of the “cut-off price” of Russian oil, used to forecast Russia’s finances despite constant price fluctuations, would be delayed until next year.

Above the cut-off price, which is currently $59 per barrel, excess oil revenues are channeled into Russia’s National Wealth Fund (NWF) rather than spent on operational expenses. If oil is sold below the cut-off price, the shortfall is covered by the NWF’s reserves.

Asked about the Reuters report at his daily press briefing on Tuesday morning, Peskov confirmed that they were “now under consideration”, adding that any rule change was “the prerogative of the government”.

Russia’s plans to change the budget rule were first reported on February 25, when Finance Minister Anton Siluanov said that the change could be implemented “within a couple of weeks”. A subsequent decision by the Finance Ministry on 4 March to pause sell-offs of the NWF’s foreign currency reserves in anticipation of the change led to the Russian ruble falling 6% against the dollar earlier this month.

In February, Urals crude oil was trading at lows of under $45 per barrel, meaning that the NWF was used to cover a significant shortfall for each barrel sold, amid a near 50% fall in year-on-year oil revenues.

However, since then the US-Israeli war on Iran has sent the Urals barrel price skyrocketing to over $100, as global supply has suffered from severe disruptions to key shipping routes in the Gulf. According to preliminary calculations made by Reuters, Russian oil revenues could reach nearly 1 trillion rubles (€10 billion) in April, their highest monthly level since October.

In a bid to stabilise the global market, the US Treasury dropped its sanctions on Russian oil and petroleum already loaded onto tankers worldwide earlier this month, although it claimed the measure would “not provide significant financial benefit to the Russian government”.

On Monday, Vladimir Putin urged restraint in assessing the impact of the Iran war on the Russian budget, calling for “prudent decision-making [...] to guarantee the long-term balance” of the country’s finances.