Slump in Russian dividends adds pressure to war-stretched public finances
The Kremlin’s towers are seen with Moscow’s International Business Center (Moskva City) in the background in Moscow, Russia, on Feb. 13, 2025. (Tatyana Makeyeva / AFP via Getty Images)v
Russian companies are slashing dividend payments as lower oil prices and a stronger ruble weigh on profits, complicating the government’s efforts to finance higher spending on the country’s decade-long war against Ukraine.
Interim dividends declared by Russian firms — many of which the state partly owns — for the first half of 2025 almost halved versus last year to 341.8 billion rubles ($4.09 billion), according to calculations by Russian business daily Kommersant, after lower commodity prices hit profits.
The largely state-owned oil industry saw some of the greatest reductions in payouts — with Gazprom Neft cutting its mid-year payments to investors to 82 billion rubles ($982.4 million) from 246.4 billion rubles last year — after lower prices and a stronger ruble hit profits.
Steelmakers Severstal and MMK, both of which are privately owned, canceled their interim dividends altogether. Last year, Severstal declared interim payments of 26.02 billion rubles ($310.6m).
While the Russian economy fared better than some had initially expected in the immediate aftermath of the country’s 2022 full-scale invasion of Ukraine, there is now growing evidence of severe repercussions for the economy, with high levels of military spending fuelling persistent inflation, the rate of which has run consistently at more than double the central bank’s target rate of 4%.
The high interest rates imposed by the Russian central bank to control inflation have raised many firms’ borrowing costs, squeezing profits, even as they contend with already challenging conditions on world markets due to U.S. President Donald Trump’s unpredictable use of tariffs, as well as sanctions and the threat of further measures.
The dividend policy of Gazprom Neft, one of Russia's largest oil producers, specifies a payout of at least 50% of the firm's net profit, which sank 54.2% year on year in the first half of 2025 to 150.5 billion rubles ($1.80 billion).
The Russian Finance Ministry has revised downward the amount it expects the federal budget to receive in dividends this year by 19.55 billion rubles ($233.1 million) to 793.3 billion rubles ($9.50 billion), Russian news agency Interfax reported on Sept. 24.
The draft budget for the next three years assumes dividend income of 703 billion rubles in 2026, 765.2 billion rubles in 2027, and 829.2 billion rubles in 2028, according to the report.
Meanwhile, the country’s budget deficit is now expected to swell by 1.944 trillion rubles ($23.29 billion) this year to a high of 5.737 trillion rubles ($68.73 billion) — or 2.6% of gross domestic product (GDP) — according to ministry documents cited by media reports last week.
On Sept. 23, Trump wrote on social media that "Putin and Russia are in big economic trouble, and this is the time for Ukraine to act," following a meeting with President Volodymyr Zelensky on the sidelines of the U.N. General Assembly in New York.
The next day, on Sept. 24, the Russian Finance Ministry proposed a two percentage point rise in the rate of value-added tax (VAT) to 22% "to finance defense and security." In 2024, VAT accounted for 37% of budget revenue.
Prominent Russian figures in government and industry have been warning of damaging consequences since the interest rate reached a peak of 21% in October last year, and have continued to raise the alarm even as the central bank began lowering it in June.
Dividends from state-owned gas export monopoly Gazprom had been a major source of government revenue before sanctions curtailed flows to Europe, its main market. While the Russian budget received more than half of the record 297.1 billion rubles ($3.56 billion) paid in dividends by Gazprom for 2020, no payments are expected this year, Finance Minister Anton Siluanov said in May.
Not all firms have suffered quite so badly. Fertilizer producer Phosagro declared an interim dividend of 273 rubles per share for the first half of 2025, which — though lower than the 387 rubles initially recommended by the board — was more than double the 117 rubles per share paid for the second quarter of 2024. The firm’s net profit jumped 41% in the first half to 75.5 billion rubles due to higher prices and strong demand for fertilizer from India in particular — its fastest-growing export market.
The dividends of Russia’s largest gold mining firm, Polyus, are another exception amid record prices for the precious metal. Its board proposed in August a payment of 70.85 rubles per share based on its second-half results, which saw profit rise 27% year on year to $2.02 billion.
For the third quarter and first nine months of this year, 510 billion rubles ($6.08 billion) in interim dividend payouts are forecast by Russian brokerage Tsifra Broker. Oil producers Lukoil and Rosneft are expected to account for three-quarters of the total.
As of mid-September, the boards of 22 Russian firms had recommended interim dividends, six of which had approved the payouts for a total of 100 billion rubles, according to Kommersant.
Before wider-ranging sanctions were imposed in the wake of the 2022 intensification of Russia’s war against Ukraine, the high dividends offered by many publicly traded Russian firms had been a major draw for Western investors — despite recognition even then of the country’s high level of political risk.
As of Sept. 29, one U.S. dollar was equivalent to 83.26 Russian rubles.
