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accounted for 49% of all export earnings ($243.8bn), with oil and gas revenue accounting for 36% of the federal budget.
In 2022, the budget’s reliance on energy exports has only grown, with oil and gas revenue growing due to high oil prices, despite Urals oil being cheaper than Brent crude by 30-35 dollars per barrel to account for sanctions risks.
Meanwhile, Russia’s revenue from other sources is falling. In April, oil and gas export revenues reached RUB1.8 trillion rubles ($29bn; doubling, in annual terms) from RUB1.2 trillion rubles ($19.5bn) in March, with their share of the federal budget increasing to 63%.
Russia’s dependence on gas is half the size of its dependence on oil. In 2021, oil exports accounted for 22.4% of the country’s total exports in monetary terms; natural gas accounted for 11.3%. Oil and oil products are a key source of export revenue: in 2021, they accounted for $180bn, whereas gas accounted for $64bn.
We still don’t have official projections of how much Russia will lose; the Kremlin and the government haven’t yet commented on the historic ban. However, there have been several unofficial estimates:
According to Bloomberg, the embargo will cost Russia a total of $22mn in oil revenue per year. $12bn of that will come from the closure of the pipeline in northern Europe, and $10bn is from the ban on sea exports. Russia will continue earning $6bn per year on exports to Hungary, the Czech Republic, and Slovakia.
Using data from the Norwegian analytics company Rystad Energy, Reuters estimated that Russia will lose $3.4bn per month (for a total of $40.8bn per year) after the embargo’s official adoption, and that the monthly losses will grow to $4.5bn ($54bn per year) after the embargo comes into full force.
According to an estimate made by Energy Aspects founder Amrita Sen published in the Wall Street Journal, Russia will lose about $170mn in income per day if the current reduced oil prices remain the same. That’s about $5bn per month, or $60bn per year.
Oil prices will rise, but not forever. The hit the Russian budget took in 2022, which was widely predicted even before this embargo, will be softened by the inevitable rise in global prices that will follow the exit from the market of a large portion of Russia’s oil. Oil prices responded to the news by continuing to increase: on May 31, Brent’s price was over 120 dollars per barrel — more than 7% higher than four days earlier.
The average price of Russian oil in 2022 so far is $83.5 per barrel (compared to an average of $61.6 per barrel during the same period in 2021). Russia’s federal government, meanwhile, budgeted for an average oil price of $44.2 per barrel.
In 2023, however, the scale of the losses will depend on how quickly Russia is able to redirect its exports to China, India, and other Asian countries (for example, Pakistan, Malaysia, Indonesia, and Vietnam).
22 RUSSIA Country Report October 2020 www.intellinews.com