Page 14 - RusRPTDec23

The Russian Russia’s budget went back into profit in August (chart) and Ministry of Finance (MinFin) revised its estimate for the full year deficit down from RUB2.9 trillion ($33bn), or about 2% of GDP, to RUB1.45 trillion. At the start of the year, when the twin embargos were introduced on December 5 and February 5, most commentators thought that the deficit this year would be of record size of RUB3-4 trillion or more.
This situation has prompted discussions as part of the twelfth sanctions package that is due to be decided this week, about the need to strengthen the enforcement measures.
To date there has been a minimal effort to enforce the oil price sanctions. The US government decided to impose secondary sanctions on two shipping companies for breaking the oil price cap sanctions for the first time on October 13, but analysts say the White House is unlikely to
follow up with wide-ranging measures or strict enforcement, as it is concerned
with restricting oil supplies that would send the price of oil even higher, ahead of the US presidential elections slated for next November. As a result,
any further oil sanctions are likely to remain largely symbolic.
The sanctions have also barely affected Russia’s oil production, which reached 9.53mn barrels per day in October, the International Energy Agency (IEA) reported this week, which is down from the 11mn bpd Russia was producing on the eve of the start of the war in February 2022. However, that number has been artificially lowered after Russia agreed with the OPEC+ members to voluntarily reduce its output by 500,000 bpd as part of a joint effort to push oil prices higher. After the start of the war a report from Yale predicted that Russia’s oil production would collapse to 6mn bpd as a result of sanctions.
The stricter enforcement measures for the oil price cap are unlikely to make any difference. The original purpose of the price cap sanctiosn was to turn off the spigot of oil revenues the Kremlin has been using to fund its war machine, and that effort has failed.
Global oil prices have rallied in the second half of this year, and another study by PIIE showed that Russia has been charging market rates for most of its oil, all of it well above the $60 price cap.
The future of the price cap is currently a subject of debate the FT reports, with discussions on the topic taking place during the recent US-EU summit in Washington. Advocates argue that the cap is a crucial
14 RUSSIA Country Report December 2023 www.intellinews.com