Page 75 - RusRPTFeb23

The price cap on seaborne Russian crude oil, enacted by the EU, G7, and Australia on December 5, limited the price to $60 per barrel. For the rest of the month, Russia’s seaborne oil exports fell by 117,000 barrels per day (to 2.615mn barrels per day) on average.
According to the Finnish Center for Energy and Clean Air Research (CREA), the price ceiling is costing Russia $172mn per day. CREA expects these losses to increase to $280mn per day in February when the EU ban on the purchase of Russian refined petroleum products comes into effect. The Russian Ministry of Finance estimates that the oil revenue loss in January will amount to RUB54.5bn rubles ($804mn).
In the first month of 2023, oil prices remain relatively low ($80 per barrel of Brent), and Russian Urals, according to Bloomberg, is even below $40. Such a price environment threatens the budget in 2023 with even more serious problems. In December 2022, Russian Urals oil cost an average of $50.47 per barrel - 1.4 times cheaper than in December 2021 ($72.7), and 1.5 times cheaper, than the average in 2022 ($76.7). On January 6 a barrel of Urals in the port of Primorsk in the Leningrad Region was sold at $38.
The Russian budget deficit in 2022 amounted to RUB3.3 trillion, or 2.3% of GDP, Finance Minister Anton Siluanov said. This is RUB400bn, or 0.3% of GDP, more than the ministry predicted less than a month ago, on December 12. At the end of September, the forecast was even more optimistic (RUB1.3 trillion, or 0.9% of GDP).
According to Alexander Isakov, chief economist at Bloomberg Economics for Russia, the budget revenue for the year was close to the September forecasts of the Ministry of Finance. On the other hand, the expenditure part increased significantly, by RUB2.1 trillion, and RUB1.3 trillion of this addition fell on “other expenses”, behind which the articles “national security” and “national defence” are hidden.
The budget for 2023 was drawn up with the same deficit as in 2022, a deficit of 2% of GDP and an average annual price of Urals of $70.1 per barrel.
The level of budget problems will depend not only on the price of oil, but also on the volume of production. The Ministry of Finance included several scenarios in its forecast for 2023: with a price of $50 for Urals that has already arrived in December, and a decrease in production to a very possible 9mn barrels per day from a peak of 11mbpd pre-war, means oil and gas revenues for 2023 would amount to RUB6 trillion, RUB2 trillion below the plan and twice as much as the planned deficit for the 2023 budget.
Taking into account the ongoing war in Ukraine, it will be difficult for the government to reduce spending in 2023, which means that it will have to
75 RUSSIA Country Report February 2023 www.intellinews.com