Russia relies on oil revenues to reduce its budget deficit

Russia's finance ministry said the budget deficit continued to shrink in October due to high oil prices, a weak ruble (the local currency) and quarterly tax payments. Economic data show that exports of refined oil products are starting to recover due to increased fuel exports.

At the end of October, the budget deficit for the first 10 months of the year amounted to 1.24 trillion rubles ($13.45 billion), or 0.7 percent of GDP. That compares with 1.7 trillion rubles, or 1 percent of GDP, a month earlier.

Despite a 26.3 percent year-on-year decline in the first ten months of the year, oil and gas revenues rose 27.5 percent year-on-year in October.

Russian President Vladimir Putin has boasted of his country's economic strength in the face of Western sanctions, including a cap on the price of Russian oil.

However, the war in Ukraine has led to a sharp increase in spending, forcing the government to reduce spending in other areas of the budget, such as health care and education.

According to a draft financial plan released in September, defense spending will account for nearly a third of total budget spending by 2024.

Increase in oil exports

In the same context, economic data showed that Russian oil product exports began to recover on the back of higher fuel exports, due to a decline in exports due to diesel export restrictions and seasonal refinery maintenance operations.

According to Vortexa Limited, a consulting and economic analysis firm, Russian exports of petroleum products totaled about 2.5 million barrels per day in the week ended Nov. 4, the largest daily volume since September, when the government decided to ban motor fuel exports.

Bloomberg reported that the global oil market is closely watching Russia's fuel exports to estimate its oil production after the country stopped publishing oil production data. It added that Russian oil exports were now close to their highest levels in recent months.

The agency said it expects exports of Russian petroleum products to continue to grow in the coming period as refinery output increases after seasonal maintenance operations end. At the same time, some shipment delays due to weather disturbances over the past month may have contributed to the current increase in exports.

Gasoline exports increased to 502,000 barrels per day, but diesel exports fell 10 percent last week from the previous week to about 804,000 barrels per day, the lowest level since early last month.