Russia's Oil Economy Is Cracking At The Seams

Rosneft's profit collapsed by almost 60%.

Sanctions, falling oil prices and the abnormal strengthening of the ruble have hit the "heart" of Russia's oil economy, writes The Moscow Times.

The net profit of Rosneft, the country's main production company, which accounts for every second barrel extracted from the subsoil, collapsed by 58% in the first quarter of 2025, according to its IFRS statements.Rosneft earned 170 billion rubles in the three months compared to 399 billion rubles in January-March last year. The company's revenue sagged 12% to 2.283 trillion rubles. And in terms of cash flow Rosneft went into negative: operating activities brought it 365 billion rubles, which was not enough to pay for all capital expenditures - 403 billion rubles."In the reporting period, the company operated under conditions of further deterioration of the macro environment, including a decline in the price of Russian Urals crude oil and widening of discounts, new sanctions restrictions, as well as strengthening of the ruble," Rosneft notes in the release.

In addition, the increase in the Central Bank's key rate had an impact, the company complains: expenses on interest payments on loans jumped 1.8 times during the quarter. To cover all the expenses, Rosneft raised 1 trillion rubles of debt in three months - four times more than in the first quarter of 2024.

"The strengthening of the ruble and the decline in oil prices had a significant restraining effect" on Rosneft's performance, Alfa Bank analysts wrote. Russia's main Urals grade fell 9% in price over the quarter, while the premium ESPO crude, which Rosneft pumps to China, fell 11%. The ruble price of oil collapsed by a quarter to 5,000 rubles per barrel in March.

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