The lower profit-based oil tax has caused Russia’s federal budget revenues from oil and gas, the backbone of the economy, to decrease roughly by 36% in May, compared to the same month last year, according to the Russia’s Finance Minister, Reuters reported.

As Russia continues what it refers to as its special military operation in Ukraine, the drop in oil money, a significant source of budget revenue, is likely to compound an already significant budget gap. In the first four months of the year, it recorded a 3.4 trillion-rouble ($42 billion) deficit as spending increased and energy receipts decreased.

Payments to refineries under the “damping mechanism” – established to prevent businesses from profiting from high fuel export prices and defend the domestic market – edged down to 103.5 billion roubles from 107.2 billion roubles in April. Budget subsidies to refining companies from the oil reverse excise tax increased to 91 billion roubles from 79.3 billion roubles.

May’s revenue from mineral extraction taxes fell by 25% from the same month in 2022 to 703.6 billion roubles, while export duties saw a 74% decline to 66.1 billion roubles.