Russia lowers oil price cut-off to boost its fiscal reserve

Russia is changing how it handles oil money. On Thursday, the Finance Ministry said it plans to roll out a new oil price formula next year that would lower the cut-off price for oil revenues going into the country’s fiscal reserve fund.

The goal is reportedly to protect the national budget from market swings and Western sanctions on energy exports.

Finance Minister Anton Siluanov said the plan is meant to make the budget “more resilient” by cutting the reliance on oil and gas revenues.

“We are proposing a reduction in dependence on various constraints, whether price-related or volume-related,” Anton said at a public forum. He’s aiming to cut energy’s share of the budget to 22% next year, down from about 25% in the first eight months of 2025.

Russia cuts cut-off price yearly, reinstates budget rule

Under the new formula, Russia will lower the oil price cut-off by $1 every year until it hits $55 per barrel in 2030. The current level is $60. Any oil revenues from prices above the cut-off go straight into the reserve fund. When prices fall below that point, the reserve is used to cover the gap.

Anton is also pushing to revive the “budget rule,” a mechanism dropped after the war in Ukraine began. It was first introduced by Alexei Kudrin in 2004. Without it, the budget becomes vulnerable to market drops.

Russia plans to withdraw 447 billion rubles ($5.39 billion) from the fiscal reserve this year to help cover a budget deficit expected to top 1.7% of GDP. The fund currently holds around 4 trillion rubles ($48.25 billion).

The draft budget is set to go to parliament on September 29. It puts the average price of Urals crude at $59 per barrel in 2026. That’s below the cut-off, meaning the reserve likely won’t grow that year.

There’s also talk of a VAT hike to plug the deficit, but Dmitry Peskov, Vladimir Putin’s spokesman, said the government is still working on the plan. As usual, final numbers will be agreed with Putin before anything gets published.

Central bank backs plan as oil market reacts to Fed move

Putin isn’t thrilled with the current growth. He told his cabinet this week he’s not satisfied with the slowdown, as GDP is expected to grow just 1% this year, way down from 4.3% in 2024.

Standing next to Anton, Central Bank Governor Elvira Nabiullina said a stronger budget would let the bank cut rates to 12–13% in 2026 from today’s 17%.

Oil markets barely moved Thursday. Brent was up 10 cents to $68.05 a barrel, and West Texas Intermediate rose 4 cents to $64.09. Traders are watching how the U.S. economy reacts after Donald Trump’s Fed cut interest rates.

At the same time, U.S. crude stockpiles dropped sharply last week. Imports hit a record low, while exports jumped to their highest in almost two years, based on Energy Information Administration data.

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