Russian Spending on Refinery Subsidies Hits Highest since 2022

SUBSCRIBE SEARCH ARTICLES NEWS Russian subsidies paid to oil producers for keeping road fuels in the domestic market climbed to the highest in more than four years, eating into the Kremlin's energy revenues. Image by Max Zolotukhin via iStock

Russian subsidies paid to oil producers for keeping road fuels in the domestic market climbed to the highest in more than four years, eating into the Kremlin's energy revenues.

The subsidies totaled 415 billion rubles ($5.1 billion) last month, according to Finance Ministry data published on Thursday. That's the highest level since the record payout of 450 billion rubles in April 2022.

The subsidies are designed to incentivize Russian oil producers to supply fuel to domestic consumers even when it's more attractive to export. As global crude and fuel prices jumped this year with the turmoil unleashed by the Iran war, the monthly payouts to Russian refineries increased from several billion rubles in January to hundreds of billions now.

Most of the subsidies go to the nation's largest oil companies - from Rosneft PJSC to Tatneft PJSC - which own the key refineries. The payouts are providing vital financial support to the companies as they scramble to repair plants damaged by Ukrainian drone attacks. The government is keeping the subsidies in place, even as it bans exports of most diesel, gasoline and jet fuel.

The increasing payouts are eating into the government's coffers. October payouts equated to about half Russia's net budget oil revenues of 829 billion rubles, according to Bloomberg calculations based on the Finance Ministry data. The subsidies have amounted to almost $20 billion so far this year, according to the calculations. 

In the first half of October, Ukrainian military forces hit several key Russian oil-processing facilities, including the nation's largest at Omsk in western Siberia. The campaign was paused in the second half of last month, following calls by President Donald Trump to halt the attacks, as he sought to lower US fuel prices ahead of midterm elections.

Russia's total net oil and gas revenues in October reached 971.2 billion rubles, up more than 9 percent year on year, according to Bloomberg calculations based on Finance Ministry's data. The revenues more than doubled from the previous month, as they include a portion of Russian oil producers' profit-based tax for the year.

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