Page 12 - RusRPTNov23

Notably, the impact of these currency controls on the economy appears to be somewhat less pronounced than that of the export duty introduced in October, which escalates with fluctuations in the ruble's exchange rate. This export duty effectively allows the state to claim a portion of the exchange rate rent generated by exporters when the ruble is weaker, estimated to be between 30% to 40% by First Deputy Prime Minister Andrei Belousov. However, companies operating with slim profit margins in competitive markets are among the hardest hit by these new requirements. The export duty compels them to raise product prices, ultimately resulting in customer losses.
The ongoing consolidation and tightening of these measures, initially intended to be temporary and aimed at supporting the ruble, underscore the extended period of economic turbulence that the Russian economy is currently navigating. Recent economic forecasts project the dollar at 94 to 98 rubles, with year-end inflation reaching 7%, and the Central Bank rate at 15%. This forecast highlights the enduring challenges facing the Russian economy, as explored in greater detail in our evening newsletter.
2.4 Europe could face diesel prices rises this winter
Europe could face spiking prices for diesel this winter as it grapples with a shortage of diesel fuel and heating oil, largely due to the loss of its primary supplier, Russia, following the ban on Russian fuel imports in response to Moscow's invasion of Ukraine in February 2022. Before the ban, Russia had been responsible for over half of Europe's diesel and gasoil imports.
Since the ban, Europe has sought alternative supplies of diesel and increased imports from the Middle East, the United States, other Western Hemisphere countries, and Asia.
The change has brought about its own set of problems due to much longer supply chains. In the past, cargoes could be swiftly delivered to European ports like Rotterdam in a matter of days from Russia's Baltic export port of Primorsk. Now, it takes weeks to arrive from the Middle East and months from Asia, leading to delays in fuel deliveries.
Another concern is if Middle Eastern refiners can meet Europe's winter-diesel specifications. This was not a concern a year ago before Europe imposed the oil product ban on February 5, but this year it will be. Delays in the ramp-up of processing at new facilities in Kuwait and Oman, coupled with extensive maintenance schedules at Saudi Arabian plants, have dampened expectations for increased supplies of diesel and heating oil from the Middle East.
Even Europe's own refineries are facing challenges. A global shortage of distillate-rich crude and the resurgence in demand for jet fuel are impacting refining operations. Despite near-record profitability and high margins for producing middle distillate fuels like diesel and gasoil, European processing is struggling. Plant closures account for only around half of the 11% drop in the region's refinery runs in August compared to pre-pandemic levels, according to the International Energy Agency (IEA).
12 RUSSIA Country Report November 2023 www.intellinews.com