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of this year.
Recovering product exports, high domestic margins: There are two main reasons why Russian refining output is rising. First, margins are improving, mostly due to the large discount of Urals crude to Brent and other international crude markers, reported to be anywhere from $20/bbl to $40/bbl. This effectively makes refining margins higher by reducing the cost of raw materials. Second, Russian oil companies have made progress on rerouting refined product exports from Europe, which has ambitions to completely refuse Russian oil in the coming months, to Africa and the Middle East. Regarding the latter, recent reports have indicated that Saudi Arabia is importing significant amounts of Russian fuel oil to burn in its power plants, presumably freeing up its own supply to export to Europe.
Russia saw its revenues from natural gas exports slump 40% month on month in June, highlighting the self-inflicting damage that Gazprom’s recent cuts in gas supply to Europe are doing to Moscow’s coffers.
The country’s gas export revenues in June amounted to RUB633bn ($10.7bn), the Moscow-based Vedomosti newspaper reported this week, citing federal tax data. In May, those revenues amounted to more than RUB1 trillion. Oil sales were also down, by 10%, to RUB605bn in June.
Much of the international attention on Russian cuts to gas supply has centred on the impact this is having on European energy markets, which is certainly substantial, with spot prices having spiked at $2,200 per 1,000 cubic metres on July 27 for the first time in history. But Gazprom’s actions have also caused significant harm to the Russian budget.
Exactly how much harm it has caused is impossible to say, as the government has not been disclosing budget details since the invasion of Ukraine began. Vedomosti also reached out to Gazprom, Rosneft, Lukoil, Gazprom Neft and Surgutneftegaz for details on oil and gas exports, but received no response.
In dollar terms, gas export revenues fell to $11.1bn in June from $16.2bn in the previous month. Vedomosti notes that despite the month on month slump, Russia’s revenues from gas sales abroad were still three times higher in June than in the same month last year, highlighting the impact that soaring European gas prices are having, despite the cut in volumes.
In volume terms, Russia exported 10.9bn cubic metres in June, down from 12 bcm in the previous month. In contrast, it shipped 15.7 bcm in May and in June in 2021.
Russia began cutting off gas customers in late April after some refused to comply with a Kremlin decree requiring payment in rubles. Since June, it has
114 RUSSIA Country Report October 2020 www.intellinews.com