Russia’s Finance Minister, Anton Siluanov, announced on Monday that the country’s sovereign wealth fund will continue to grow despite Western sanctions, thanks to surging oil and gas revenues. The National Wealth Fund (NWF) was established to support the national pension system and to address budget deficits as necessary. In July, revenues from oil and gas sales saw a 5.3% year-on-year growth, totaling $8.66 billion. Gas exports contributed the most to this revenue, while earnings from oil sales rose by 2.6%. This marks the first time this year that Russia’s energy export revenues have increased compared to the previous year.
Siluanov also revealed that non-energy earnings, such as import turnover tax and income taxes, have also grown in 2022 compared to 2021. This positive trend in both energy and non-energy revenues has allowed for the accumulation of additional funds in the NWF, exceeding the base annual amount of 8 trillion rubles ($83.2 billion).
One factor contributing to Russia’s increasing oil revenues is the price of Urals crude, which averaged $74 per barrel last month. This surpasses the $60 price cap imposed by the EU and G7 countries to limit Moscow’s oil revenues. Russia’s Urals crude has consistently exceeded this cap for the past two months. While Western sanctions have restricted Russia’s access to traditional markets, they have prompted a significant reshuffling in global oil supply. Russia has successfully redirected its exports to Asia and has become India’s largest oil exporter, accounting for 45% of the country’s crude purchases in June. It has also been China’s top supplier since January.
The growth in Russia’s sovereign wealth fund is particularly significant in the face of Western sanctions. These sanctions have aimed to weaken the Russian economy by limiting its access to international markets. However, Russia has managed to diversify its revenue sources and find alternative trading partners. The country’s ability to increase its rainy day fund showcases its resilience and adaptability.
The wealth fund’s growth will not only support the national pension system but also provide a buffer against budget deficits. This is crucial in ensuring the stability of the Russian economy amid geopolitical challenges and the volatile energy market. The accumulated funds can be utilized to address any unforeseen economic shocks or disruptions.
Overall, Russia’s ability to maximize its energy revenues and strengthen its sovereign wealth fund demonstrates its determination to weather the storm of Western sanctions. By diversifying its trade partners and capitalizing on the high oil prices, Russia has managed to mitigate the impact of sanctions and maintain its financial stability. The continued growth of the National Wealth Fund is a testament to Russia’s fiscal prudence and its ability to adapt in the face of adversity.