Page 20 - RusRPTNov22

soaring inflation. But more recently at the end of September the Hungarian national bank (MNB) decided to pause the hikes at the end of September, but put through fresh emergency rate hikes in the middle of October, after it realised it had not done enough to stop the rot. The regulator also said it would start providing foreign exchange reserves to finance energy imports.
“Hungary’s central bank, as well as others in the region, will take some comfort from the fall in gas prices for improving the inflation outlook and reducing pressure on their currencies,” says Farr.
But the recent tumble in gas prices provides only temporary relief, argues Capital Economics. Even after their tumble in the last few weeks, the prices for gas and power remain very high at record levels. At the same time, the inflation caused by ballooning energy prices are being kept high by various “second round” effects that will be a lot more persistent.
Finally, even if the drop in prices and 100% full tanks at the start of the heating season will mitigate the energy crisis this year, the fact that Nord Stream pipelines are now permanently offline means that refilling the tanks next year will be an even bigger challenge. The energy crisis is unlikely to go away.
New front in economic war will open soon
The gas price cap, together with a mooted oil price cap scheme that is due to go into effect in December, could both well bring fresh supply and price shocks, say analysts. For its part, the Kremlin has said it will simply cut off supplies to anyone that attempts to cap prices. The assumption in the West is the Kremlin won’t be able to forego the revenues, which make up the largest part of the government’s income. However, the latest Central Bank of Russia (CBR) macroeconomic survey found that the Russian economy is in surprisingly good health and Putin seems confident that he can sell enough hydrocarbons to his friends in India and China to cover the costs of running the country.
In preparation for the coming clash, shipbrokers report seeing large numbers of tankers being booked by undisclosed customers in the last six months, leading to speculation that a large fleet is being amassed, ready to reroute Russian crude and products from Europe to Asia once the European oil embargo goes into effect on December 5.
“There’s been a sharp rise in the tanker trading” since the start of the Ukraine crisis and ahead of the start of the European crude embargo on December 5, with many or most purchases being conducted by undisclosed entities “based in countries such as Dubai, Hong Kong, Singapore and Cyprus”, according to Anoop Singh, head of tanker research at shipbroker Braemar, as cited by BCS GM. “Will there be enough ships? Perhaps... Braemar estimates that, to reroute c4mn barrels per day (bpd) of Russian crude and products from Europe to the Pacific Region, many of the recently purchased vessels will be required to join the “102 Aframaxes, 58 Suezmaxes and 80 very-large crude carriers” that have been transporting Venezuelan and Iranian crude in the recent past.” BCS GM speculates that part of the Russian plan is to make substantial at-sea ship-to-ship transfers to disguise the origin of the oil and
20 RUSSIA Country Report November 2022 www.intellinews.com