On Monday, RBK business daily reported that the Russian government is preparing to begin reducing the discount it is offering on its flagship Urals blend of crude oil over the Brent benchmark, according to  draft of the federal budget for 2024-2026.

The report revealed that the discount is expected to gradually be reduced from the current $20 per barrel to $6 per barrel in 2026. The report said that in 2024 the discount would be reduced to $15 per barrel and by 2025 it would be reduced to $10 per barrel.

The Russian government also altered the way it will asses the prices of crude for tax purposes following the initiation of the EU’s December embargo on purchases of Russian petroleum products, and the imposition of price caps on Russian oil and petroleum products by G7 nations. The changes will help offset the effects on budget revenues which were being produced by the drop in the price of Urals crude. At times, Urals crude has been priced as much as $35-$40 below the price of Brent crude.

Russian President Vladimir Putin had signed a number of amendments to the tax code for the energy sector in July which would reduce the discount of Urals crude over Brent from $25 per barrel to $20 per barrel beginning in September.

RBK reported that as a result of the changes to the discount, the Russian budget will collect an additional 860.9 billion rubles ($8.9 billion) in 2024, an additional $9.7 billion in 2025, and an extra $8.9 billion in 2026. Due to this, oil and gas revenues, which are projected to come in at $92 billion in 2023, are forecast to reach $119 billion in 2026.

The Kremlin is reportedly developing the nation’s own price indicator, which will calculate prices based upon trading on the St Petersburg International Mercantile Exchange (SPIMEX). According to RBK, it will become operational at the beginning of 2024, and will also be used to calculate oil taxes.