Page 43 - bneMagazine March 2023 oil discount

bne March 2023 One Year On I Special focus I 43
Find out more about the impact on sanctions on Russia’s economy. Watch bne IntelliNews’ podcast with an all-star cast of the leading commentors on the Russian economy here.
ONE YEAR ON:
IMPACT OF SANCTIONS ON RUSSIA’S ECONOMY
The war in Ukraine started one year ago and Russia has been hit by some of the most extreme sanctions ever seen on such a large economy. But have they worked? The government’s revenue tumbled in recent months, but in 2022 Russia had the largest current account surplus ever. Now two rounds of oil export sanctions have been imposed but it is clear there is already significant leakage via India and China.
Moderator: Ben Aris, editor-in-chief and founder of bne IntelliNews
Elina Ribakova
Deputy chief economist at Institute of International Finance (IIF)
Iikka Korhonen
The head of the Bank of Finland Institute for Emerging Economies
Alexander Isakov
The chief Russia and CEE Economist for Bloomberg Economics and previously chief economist for Russia and CIS at VTB Capital
Ivan Tkachev
Economics Editor at RBC
earned by budget from all oil exports to decide if money should be siphoned off into the NWF or to simply pumped straight into the budget.
Much will depend on how the oil and gas revenues story plays over the rest of the year.
Oil and gas revenues
There is a great deal of uncertainty
over what will happen this year. The government’s revenues got off to a really bad start in January, but it remains to
be seen if the oil price cap schemes
can be made to work and if Russia can continue to reorientate its exports to Asia. And it is already becoming clear that the oil sanctions are very leaky.
Isakova said: “The updated current account forecasts are a bit confusing: the average oil price for 2023 was down by -$15 per barrel, but the exports of oil was almost unchanged at about RUB0.5 trillion for the year, but should have been down about 10%. One hypothesis for this is the Bank of Russia believes Urals benchmark price is flawed and understates export price.”
The Kremlin already has multiple schemes to dodge sanctions. The most obvious is that it has bought up old tankers and is operating a “ghost fleet” of anywhere between 150 and 600 tankers that are not subject to the oil price cap restrictions.
Greek shipping companies have also been helping by increasing the amount of Russian crude they ship, much to the ire of the EU, and with the reported deep discounts Russia is offering on its oil, far below the $60 cut-off, after which restrictions apply to shipping Russian oil, even these EU member-owned ships can legally transport Russian oil to anyone that wants to buy it.
At the same time, scams like ship-to- ship transfers, one of the easiest ways to dodge sanctions and disguise the origin of Russian oil, have exploded. They
are most visible off the Spanish North African city of Ceuta and off the Greek coast near Kalamata. At least 30 cargoes have been transferred between ships
in those two locations since the start of the year, according to Bloomberg based on a study of ship destination and cargo data. Twelve more Aframax tankers that loaded in the Baltic since late January also appear to be transferring their cargoes to other vessels at sea in the Mediterranean, the newswire reports.
And Russia’s friends in the Global South are coming to its rescue. India continues to import large amount of Russian crude, but as the oil products embargo loomed, African nations boosted the import
of Russian oil products, including the all-important diesel exports, in January as the market races to remake itself in the face of the new realities. Turkey, Morocco and Senegal in West Africa
all became big customers of Russian diesel. Turkey imported 213,000 bpd of Russian diesel in December, reaching its highest level since 2016, according
to Vortexa Ltd. A similar trend was seen in Morocco, which has also noticeably stepped up imports of diesel from Russia.
Analysts at oil consultants Kpler speculated that African nations, many of which support Russia or at least remain neutral, will consume more Russian diesel or export it back to the EU. In the same game of musical chairs, the EU will also start sourcing diesel from further away, from the likes of the India, which is using Russian crude in its refineries to make “Indian” diesel.
Finally, it appears that Russia is playing
Russia budget total oil and gas revenue, RUB bn
Source: MinFin
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