In 2022 Russia withstood and largely neutralized the impact sanctions imposed on him by the West and the fall in natural gas exports to Europe. However, 2023 will be clearly a tougher year, as energy prices and especially Russian oil prices will be lower. And the reason is that the ceiling of $60 per barrel has come into effect, which, according to the Financial Times, is already worrying economists in the Kremlin. As the British newspaper points out, in December, the President of Russia Vladimir Putin he called the cap “stupid”, said he saw no reason to “worry about the country’s budget”, and raved about his “inexhaustible” ability to finance an invasion of Ukraine.

Last year, Moscow’s revenue from oil and natural gas exports reached 11.6 trillion. rubles, the amount is equivalent to $168 billion and became the highest since 2011. The reason for the dizzying profits was the rise in energy prices, as well as the fact that tankers with Russian oil changed direction and instead of Europe headed for Asian markets and mainly India and China. But now that oil prices have fallen and the cost of war has pushed Russia’s budget deficit up to 2.3% of GDP, the risks to the Russian economy have become clear. Moreover, the revenues from the export of oil and natural gas account for 40% of the country’s budget. Brent oil will hit $83 a barrel this year, down 18% from last year, according to the US Energy Information Administration. However, Russian oil will cost significantly less, analysts at Kpler Group said, as buyers in Moscow who buy Russian oil demand ever greater discounts compared to the price of Brent crude. According to the Kyiv School of Economics, Moscow’s forced layoffs cut its revenues by $50 billion last year. This amount corresponds to 12% of the revenue that he planned to collect. The $30-$35 difference between the price of Brent oil and the price of Urals oil, which is the dominant oil in Russia, is ten times greater than before the Russian invasion of Ukraine. According to data from Argus, Urals crude fell after the $60/bbl cap was imposed on Dec. 5 and is currently trading at $44/bbl, 48% below the price of Brent. After all, this is well below the $70 level used as the baseline for Russia’s 2023 budget. Russia is expected to face a budget deficit of 2% of GDP this year.

In an interview with a British newspaper, Ben Cahill, head of the US Center for Strategic and International Studies, expressed an assessment that “even if Russian exports increase, this will not be a problem for the West, because they got what they wanted.” : oversupply in the market and a decline in Russia’s income. After all, according to Georg Zachman, head of the Brussels-based think tank Bruegel, the bundling is expected to deprive the Kremlin of about 160 million euros a day, according to a related study by the Helsinki Center for Energy Research (CREA). The center estimates that Russia’s revenue from fossil fuel exports fell 17% in December from the previous month, the lowest level since February last year. On the Russian side, of course, the Ministry of Finance reports a 7.5% increase in oil and natural gas revenues over the same period, and the reason is the depreciation of the ruble, as well as the excess profit tax levied on Gazprom. .

The Russian budget for 2023 predicts a 23% drop in oil and gas revenues compared to 2022 levels, but the Kiel Institute for Economics predicts a two-fold drop. That is, based on data from the Russian Ministry of Finance, if oil production falls by 7-8% compared to 2022 levels and the average price of Urals oil is $50 per barrel, then Russia will lose 23% of expected oil revenues. and export of natural gas. However, if Urals oil falls to $35 per barrel, then Russia’s hydrocarbon export revenues will fall by 45%.