Abroad will not help us – Newspaper Kommersant No. 17 (7462) dated 01/31/2023

So, the OPEC+ countries on Wednesday will almost certainly not change oil production quotas for the next two months. This is evidenced by the refusal to hold a meeting of the technical committee of experts before the meeting of ministers of OPEC + countries, as well as the fact that the meeting itself is planned in an online format. If it were supposed to somehow change the policy of the alliance, this would require at least expert consultations, and possibly personal communication between the ministers.

It is noteworthy that on Monday, Russian President Vladimir Putin discussed the OPEC + deal with the Crown Prince of Saudi Arabia, Mohammed bin Salman, by phone. Although we cannot know the content of the conversation, it is logical to assume that it would hardly have taken place if both parties were satisfied with maintaining production quotas in their current form.

In any case, regardless of whether the Russian authorities offered Saudi Arabia a joint production cut or did not resort to such a request, Moscow will now have to independently solve the problem of bringing oil export prices to values ​​that meet the needs of the budget until April. Now the gap between the price of Urals published by the Ministry of Finance and the value included in the budget exceeds $20 per barrel.

Two months have passed since the introduction of the EU embargo on Russian oil, and so far the Russian authorities have not resorted to any coercive measures against oil companies, hoping that they themselves will solve the problems that have arisen. In a certain sense, this calculation was justified, since the companies managed to practically not reduce oil production.

However, the size of the discount that Russian oil companies were willing to offer to foreign buyers was an unpleasant discovery for the Finance Ministry. In addition, the Urals market has become so opaque that at the moment it is difficult to understand not only to what extent such discounts are economically justified, but even to what extent the discount figures correspond to reality.

One might have hoped that a general rise in world oil prices would reduce the scope of the Treasury’s problems, but the neutral position of Saudi Arabia leaves little chance of this in the near future. Now the Russian authorities will have to either force oil companies to cut production in order to increase the overall level of prices in the market, or force them to reduce discounts (which will probably lead to a decrease in production). The longer the adoption of the necessary decisions is delayed, the larger the hole in budget revenues grows and the more acute the general economic risks associated with this.