Page 101 - RusRPTApr23

from Russia’s Primorsk port in the Gulf of Finland to European ports and very little oil is sold on that route now. Most of it has been redirected to customers in Asia which are paying an average of $74 a barrel according to a recent study – a lot more than the discount of over 50% that the Urals price implies.
A second factor is that since the February 5 embargo on products came into force, Russia has sent tankers with its products out over the world to find new customers, but as it takes two months for those tankers to travel to ports in Africa and Asia and back, it will take until April for the new flows of cash from those deals to appear in the budget.
A third factor is that for Russian oil companies it is more profitable to export oil at low Urals prices and refine them elsewhere such as at their EU-based refineries, sell the products on to the European market at normal prices, and book the profits at their EU subsidiaries as all that reduces their tax bill in Russia.
Russian Finance Minister Anton Siluanov has said that the Ministry of Finance (MinFin) is well aware of this change in the market and the ministry has already abandoned the Urals price for calculating taxes due, but it will take several months for the new system to be put in place. According to the latest reports, MinFin is proposing to simply use the Brent price minus a discount formula to calculate what taxes are due that will see revenues jump when this new rule comes into force in April. By how much remains to be seen.
In mid-March, Indian authorities published data showing that the discount was not as large as previously thought, with India buying Russian oil at an average of $79.8 per barrel in January, while the average exchange price of Brent was $84. Taxes for oil companies continued to be calculated based on the price of $50 per barrel of Urals for now, with the difference supposed to be deposited into foreign accounts of Russian oil company structures. Bloomberg reports that Russia has accumulated $80bn (about RUB6 trillion) of shadow reserves abroad in a year. This suggests that the situation with real incomes may not be as dire as the budget statistics suggest.
Despite this, economists believe that the budget deficit at the end of the year will not meet the plan, as promised by Mishustin. The median budget deficit for 2023, according to the Central Bank's latest macro forecast, is expected to be 3% of GDP, or around RUB4.5 trillion, which is one and a half times higher than the plan.
101 RUSSIA Country Report Russia April 2023 www.intellinews.com