Russian March oil tax halved, Middle East conflict boosts oil prices, providing support.

Based on the data released by the Russian Ministry of Finance on April 3, Russia's oil tax revenue in March was 494.9 billion rubles (approximately 61.8 billion US dollars), a sharp decrease of 48% year-on-year. The total oil and gas revenue in the federal budget for the month decreased by nearly 43% year-on-year, to 617 billion rubles. This decline reflects the Urals crude oil prices based on the March tax revenue - taxes are calculated based on the February prices. Government data shows that the average Urals crude oil price was below $45 per barrel at that time, far below the budget assumption of $59 per barrel for 2026. Under the continued energy sanctions, Russian oil surplus buyers demanded significant discounts, putting pressure on prices. The appreciation of the ruble was also one of the reasons for the sharp drop in revenue. The decrease in oil and gas tax revenue has expanded Russia's budget deficit, stalled economic growth, and continued to consume financial resources for the war in Ukraine. However, starting next month, Russia's oil and gas revenue will see a significant increase. Driven by Middle East conflicts, the price of Urals crude oil rose significantly in March. By the end of March, the price of Urals crude oil shipped to India (one of Russia's main buyers) had exceeded $120 per barrel, forming a premium over the Brent benchmark. The Iran war has almost completely blocked the Hormuz Strait - a key channel for Gulf countries' energy exports. Russian oil does not depend on this channel, making it more attractive to Asian buyers. At the same time, to curb rising oil prices, the United States has allowed a large number of countries, including India, to purchase a large amount of Russian crude oil already at sea. This exemption further stimulates Asian demand for Russian crude oil. According to sources, thanks to the sharp reversal in oil prices, Moscow is no longer planning to significantly reduce budget expenditures and may even increase defense spending in the context of the prolonged Ukraine war. However, Russian President Putin has repeatedly urged the government and oil producers to exercise restraint in spending, as high oil prices may only be temporary. The Urals crude oil price used for calculating Russia's oil and gas revenue in March was $44.59 per barrel, lower than $61.69 per barrel in the same period last year; the exchange rate was 76.85 rubles to 1 US dollar, while in March 2025 it was 92.9 rubles, meaning less ruble revenue is obtained for every barrel of oil produced and sold. Oil revenue in March reached a five-month high on a month-on-month basis, thanks to Russia's oil tax payment schedule - profit-based taxes are mostly paid four times a year (March, April, July, and October).