Russia’s revenues from oil and gas to the state budget would decrease between 2025 and 2027, due to lower raw material prices and fiscal changes, according to the draft budget for next year, reports Reuters.

According to the document cited by Agerpres, the oil and gas industry in Russia would contribute next year to the budget with 10,900 billion rubles ($117.3 billion), or 5.1% of GDP, from a level estimated this year of 11,300 billion rubles.

Also, revenues would decrease to 10,560 billion rubles in 2026 and to 9,770 billion rubles in 2027.

Instead, Russia’s military spending will rise 23 percent next year to 13.5 trillion rubles ($145.32 billion), from an estimated level of 10.8 trillion rubles this year. In 2025, military spending will account for 32% of total budget spending, which will amount to 41.5 trillion rubles. Later, in 2026, military spending would drop to 12.8 trillion rubles.

Analysts had warned this month that a drop in oil and gas revenues, following lower energy prices and a softer tax regime for Gazprom, would have implications for the war in Ukraine and Russia’s military spending.

The flow of petrodollars has helped the Kremlin continue its military aggression against Ukraine, even as Western nations have aided Kiev with billions of dollars in military aid and imposed sanctions designed to reduce Russia’s earnings from energy exports. Moscow has sidestepped the sanctions by running a phantom fleet of oil tankers and vessels to deliver liquefied natural gas (LNG) to new customers in Asia.

Another factor contributing to the projected decline in Russia’s oil and gas revenues is the plan to drop the tax burden on Gazprom, which has been a source of cash for the government, according to documents seen by analysts.

Since the invasion, the company has given up most of its pipeline exports to Europe, previously its largest foreign market. The decision last year caused Gazprom its first net losses this century. However, the government imposed a profit tax on Gazprom, expecting to receive an additional 50 billion rubles from the company each month between 2023 and 2025.

There is now a plan to ease the tax burden on Gazprom, the documents show. If the plan is adopted, the softer tax regime will reduce Russia’s revenues from oil and gas production by more than 30 percent from 2023 to just over 1 trillion rubles in 2025, according to analysts’ calculations.