Russia's oil and gas revenue plunged in May as sanctions and dwindling exports weigh on Moscow's energy trade

• Russia's oil and gas revenue plunged in May as sanctions and dwindling exports hit on Moscow's energy trade.
• Proceeds from oil and gas taxes sank 36% from a year ago to 570.7 billion rubles, or about $7 billion.

Budget proceeds from Russian oil and natural gas fell by over one third in May amid Western sanctions and lower gas exports, Bloomberg reports.

According to the country's Finance Ministry, last month's revenue from oil and gas taxes sank 36% from a year ago to 570.7 billion rubles, or about $7 billion.

Revenue from crude and petroleum products slid 31% to 425.8 billion rubles, while gas revenue plummeted 46% 145 billion rubles. That's despite higher income from a mineral extraction tax on gas, which was not enough to cover export duty losses.

Proceeds from the two commodities make up around a third of Russia's budget, which is already under pressure from spending for Moscow's war on Ukraine.

Plunging revenue is the result of Western sanctions on oil products, which were implemented as a punitive measure on Russia for its Ukraine invasion, and have forced Moscow to sell its crude to alternative markets at a discounted rate.

As retaliation, Russia cut off gas supplies to Europe, its largest market. Export tariff income from gas dropped by 81% after the country's gas giant Gazprom limited pipeline flows to the West, Bloomberg reported.

In the face of falling revenue, the Kremlin introduced a new tax mechanism in April on Russia's own energy companies that bases their tax rate on the higher-priced Brent crude benchmark, minus a fixed discount.

The G7 has estimated that the tax would cost the energy sector over the long term, as it takes away the industry's ability to finance future development.

The drop in energy revenue also comes as Russia faces other economic difficulties. A historic labor shortage is pulling down industrial output, which fell 5% in April from the prior month.

And Finland's central bank has said Russia is going through "reverse industrialization," likely to face limited growth and a bleak future.