Russia’s crude oil output increased modestly in October even as state revenues from the oil and gas sector continued to decline sharply, highlighting the growing pressure on the Kremlin’s finances as a result of international sanctions despite production holding steady.

Russia pumped an average of 9.411mn barrels per day last month, around 43,000 bpd higher than in September, Bloomberg reported on November 7, citing sources familiar with the information.  However, this remained roughly 70,000 bpd below the level permitted under its OPEC+ quota once additional “compensation cuts” for earlier overproduction are accounted for, according to Bloomberg’s calculations. Russia’s commitment to reduce output by 10,000 bpd below its formal quota of 9.491 million bpd meant a required output level of 9.481mn bpd for October, which was the final month in which such compensation reductions applied.

Despite the slight production increase, Russia’s oil and gas tax revenues fell to RUB888.6bn ($9.7bn) in October, a 27% year-on-year decline, the finance ministry said. Revenue from the mineral extraction tax (MET), a major source of federal income, dropped 26% to RUB671.3bn. Over the first ten months of the year, oil and gas revenues amounted to RUB7.5 trillion, down from RUB9.54 trillion a year earlier. The rate of decline has accelerated from 14% in the first five months to 21% by October.

The downturn is being driven by lower crude prices, a stronger ruble and tightening Western sanctions. The US imposed new measures in late October against Rosneft and Lukoil, Russia’s two largest oil producers, after President Donald Trump’s efforts to negotiate a settlement to the war in Ukraine failed to produce results. The two firms together account for approximately 2.2mn bpd of exports — about half of Russia’s crude shipments — and around 70% of Russia’s seaborne oil exports are now affected by US restrictions.

Analyst Vladimir Chernov of Freedom Finance Global estimated to The Moscow Times that a 5-10% decline in Rosneft and Lukoil exports, coupled with wider discounts on Russian crude, could cost the federal budget up to RUB120bn ($1.3bn) per month.

The pressure has been compounded by intensified Ukrainian drone attacks on Russia’s refining sector, forcing operators to conduct repeated repairs. If Moscow is unable to maintain export outlets from sanctioned producers, or struggles to restore refining capacity, it may be forced to shut in production at some fields, raising the risk of long-term damage to wells.

The average price of Urals crude fell to $53.99 per barrel in October, according to the economic development ministry — below the government’s original forecast of $70 and even its later downward revision to $56. Economist Yegor Susin warned that revenue shortfalls could deepen in November and December if oil prices remain depressed, the Moscow Times reported.

The government’s initial 2025 budget plan projected RUB10.94 trillion in oil and gas income, with RUB1.8 trillion earmarked for transfer to the National Wealth Fund. However, the Finance Ministry has revised its expectations, now anticipating oil and gas receipts of RUB8.6 trillion — a 22% shortfall — and does not forecast a meaningful recovery over the next three years. Under the latest budget draft, hydrocarbon revenues are now projected at RUB8.9 trillion in 2026, RUB9 trillion in 2027, and RUB9.7 trillion in 2028, remaining 20%, 19% and 13% below 2024 levels respectively.

With the fiscal deficit expected to reach RUB5.7 trillion this year, and exceed RUB10 trillion across the next three years, the government intends to close the gap by raising taxes outside the energy sector and expanding borrowing. Value-added tax will increase to 22% next year, small business taxes will rise sharply, and the Finance Ministry plans to issue around RUB12 trillion in new debt.

Deputy Prime Minister Alexander Novak stated last month, via the Tass news agency, that Russia retains capacity to increase production further, but would do so gradually. The Energy Ministry did not immediately comment on the October production figures.