Page 10 - FSUOGM Week 27 2022

FSUOGM PERFORMANCE FSUOGM

Russian finance
minister Anton Siluanov.

The extra oil produced in June went to against the strengthening of the ruble. “We will
refineries, which increased their capacity amid be ready to sacrifice part of the expenses ... part
seasonal increases in fuel demand. Deliveries of the expenses can be omitted, and super-oil
for processing increased by 8%, Kommersant and gas revenues can be used to carry out inter-
sources say. Demand for gasoline began to grow, ventions in the foreign exchange market. This
including due to the intensification of domestic should affect the course,” the minister said.
tourism. We are talking about a heavily modified
In addition, exporters began to adapt to budget rule: since the dollar and the euro are
the sanctions – the volume of gasoline exports toxic to Russia, you can buy "friendly curren-
for May and for the first 25 days of June, in cies", and the criterion for interventions will not
average daily terms, exceeded the levels of the be the price of oil, but the exchange rate of the
same months last year by 28% and 20% respec- ruble. In general terms, Siluanov spoke about the
tively. Purchases of oil products from Russia new rule at the St Petersburg International Eco-
are increasing in African countries, analysts nomic Forum (SPIEF), when he did not rule out
say. India's oil purchases have risen more than the accumulation of funds in yuan.
50 times since April. Oil imports from Russia This week Siluanov did not give new
to China reached record levels in May. So it is details, but said that one ruble of the aver-
premature to talk about the formation of a sta- age annual weakening of the dollar is RUB-
ble trend towards a decrease in exports, experts 130bn-RUB150bn for the budget, and "RUB10 of
believe. the exchange rate is more than a trillion rubles."
All the sanctions imposed on Russian oilmen Siluanov's proposal was opposed by the Min-
have not hit the industry too hard. Companies ister of Economic Development Maxim Reshet-
are gradually beginning to adapt; exporters are nikov. He believes that with the current currency
reorienting themselves to other markets. At the surplus in the market, the budget will not be
same time, Russian oil, according to Bloomberg, enough to buy enough currency to stabilise the
is no longer being sold at such a huge discount as ruble, and reiterated concerns about a deflation-
it was in mid-spring: the average price of Urals in ary spiral. “We, I'm afraid, will rather worsen the
the period from mid-May to mid-June was 20% situation, because in the conditions of a lack of
higher than a month earlier. And the G7 coun- demand, the reduction of budget expenditures
tries have not yet been able to agree on the intro- will only have an even more negative impact on
duction of a price ceiling for Russian oil. the economy,” the minister said.
During the Russian Union of Industrialists The Central Bank distanced itself from the
and Entrepreneurs congress held on June 29, the discussion; however, the chairman of the regula-
Ministry of Finance said it was willing to sacri- tor, Elvira Nabiullina, rather supported Siluanov,
fice oil windfall profits for the sake of weakening advocating the return of the budget rule in a new
the ruble. As bne IntelliNews reported, Russia is form with a discussion of the details. She recalled
suffering from a bad case of the Dutch Disease that although Russia cannot accumulate reserves
and the Central Bank of Russia's (CBR) only tool in hard currencies due to sanctions, there are
available to weaken an extremely strong ruble is capital restrictions on non-reserve ones. The
to cut oil and gas revenues. This suits the Krem- Central Bank is not against foreign exchange
lin politically, which has led to Gazprom reduc- interventions as such – it is categorically against
ing flows of gas to Europe by 60% in mid-June. the managed ruble, especially the targeting of the
Finance Minister Anton Siluanov admitted exchange rate, which means the loss of the sover-
at the congress of big business that the financial eignty of monetary policy, the growth of the real
authorities had the last means of "heavy artillery" exchange rate – or inflation and devaluation. ™

P10 www. NEWSBASE .com Week 27 07•July•2022