Page 14 - FSUOGM Week 02 2023

FSUOGM POLICY FSUOGM

G7 to introduce dual price cap

scheme on Russia’s refined

product exports in February

EUROPE THE G7 plans to establish two price cap schemes revenues for December, but their decline was
on the import of Russian oil products that are inevitable due to the collapse in Russian oil prices
The move follows a due to come into effect on February 5. against the backdrop of the EU oil embargo com-
price cap introduced The second part of the oil price cap scheme, ing into force on December 5.
on Russian crude oil in which is due to come into effect in a few weeks as As the Ministry of Finance itself reported on
early December. part of the sanctions against Russia, will be two- January 5, that in December 2022 Russian Urals
fold, the G7 Finance Ministers said on January oil cost an average of $50.47 per barrel – 1.4
10. times cheaper than in December 2021 ($72.7),
One price will be set for diesel and kerosene, and 1.5 times cheaper than the average in 2022
which are more expensive than crude oil, and the ($76.7).
other for cheaper oil products, such as fuel oil. The first month of the European embargo
Russian exports of refined products are much on Russian oil has not yet been marked by an
more widely distributed to customers in Europe increase in world prices: a barrel of Brent now
than crude exports that largely go to countries costs the same $80 as in early December. At the
with large refining capacities connected to the same time, Russian oil continues to get cheaper:
Soviet-era Druzhba oil pipeline network, such on January 6 a barrel of Urals in the port of
as Germany in the eastern part of Europe. Primorsk in the Leningrad Region was sold at
The distinction has been made between die- $38 – half the price of a barrel of Brent on the
sel and kerosene, as Europe remains much more same day. In December, the Urals discount to
dependent on supplies of these Russian fuels Brent remained at the level of 30-35% – this was
thanks to Russia’s very large refining capacity. already an unprecedented figure, but it did not
Diesel supplies in Europe are already under reach 50%.
pressure thanks to the previous sanctions and The budget for 2023 was drawn up with the
self-sanctioning on the export of Russian fuels. same deficit as in 2022, a deficit of 2% of GDP
According to Bloomberg, the specific price and an average annual price of Urals of $70.1 per
cap rates are still being negotiated. It is noted that barrel, but that target looks like it will be missed
the G7 is encouraged by the result of the price this year. However, some analysts speculate that
cap on Russian oil, which has collapsed the price the Kremlin may counter by voluntarily cut-
of Urals since its introduction on December 5 ting oil production this year in an effort to drive
and seen volumes of crude exports tumble by prices up again to compensate for the lower rev-
half. enues expected.
The Russian budget deficit in December At the same time, some European officials are
2022 increased by RUB400 trillion compared to wary that the restriction will trigger a shortage
forecasts and exceeded RUB3 trillion, largely as of diesel fuel in Europe, which remains heavily
a result in the fall of both the price and the vol- dependent on Russian imports. Others believe
umes of oil exports, according to a report made that the market will adapt. The EU will be able
by Russian Finance Minister Anton Siluanov this to buy resources from the Middle East and the
week to the Duma. US, which now sell more to Latin America and
There is no official data on oil and gas Africa. ™

P14 www. NEWSBASE .com Week 02 11•January•2023