The sharp rise in oil prices in September failed to deliver a corresponding increase in revenue for Russia's federal budget. The Kremlin has been forced to return a significant share of the taxes collected to oil companies, compensating them for the costs of maintaining domestic fuel supplies.
In September, gross oil and gas tax revenues amounted to approximately $10.16 billion. However, after compensation payments and tax deductions, the budget received only $5.28 billion, down 22.3% compared with the same month in 2025. Almost half of the revenue collected was effectively returned to the sector.
The largest increase came from payments under Russia's fuel price damping mechanism, which rose from $2.30 billion in August to $3.56 billion in September. This represented a monthly increase of 55% and the highest level since April 2022.
Higher oil prices only increase the cost of these compensation payments. The more profitable it becomes to sell oil on international markets, the wider the gap with domestic fuel prices, which the government compensates fuel producers for.
The situation has been aggravated by declining petroleum product output. Faced with fuel shortages, the Kremlin has restricted exports and increased imports. In August and September, seaborne deliveries of petroleum products to Russia amounted to approximately 350,000–370,000 tonnes per month.
Compensation payments have also been extended to imported fuel, placing additional pressure on the federal budget.
Between January and September, Russia's oil and gas budget revenues fell by 17.2% year on year to $63.82 billion. At the same time, oil companies received approximately $25.7 billion in compensation payments.
Against this background, Russia's Finance Ministry lowered its forecast for oil and gas revenues in 2026 to $88.4 billion, 14.5% below its previous estimate. Over the first nine months of the year, the budget collected approximately 72% of the revised annual target.
For Russia's budget, the problem is no longer simply the price of oil. Declining refining capacity and fuel shortages are forcing the Kremlin to spend increasing amounts to sustain the domestic market.
If disruptions at oil refineries continue, higher oil prices will not offset these costs, and the oil and gas sector will remain an increasingly weaker source of budget revenue.
