Experts have calculated Russia’s losses from the “ceiling” of oil prices

Tens of billions of dollars in damage

On December 5, an embargo on Russian oil supplied by sea to the EU came into force. Also, a price ceiling was introduced for the “black gold” produced in our country, agreed by the collective West at $60 per barrel. Moscow is preparing retaliatory measures and promises to approve a ban on the sale of our hydrocarbons to states that have joined the new sanctions by the end of the year. Domestic officials are sure that the next claims regarding Russian hydrocarbons will not become a tragedy for both the domestic extractive industry and the national budget. Meanwhile, according to experts, one should not be in a rosy mood, since the losses risk being very impressive.

At first glance, the principles of the sixth package of EU sanctions that have come into effect since December 5, including an embargo on oil supplies from our country by sea at a price above $60 per barrel, as well as imposing a ban on the provision of relevant services for the transportation of Russian “black gold” (insurance, brokerage maintenance and financing of operations with raw materials), did not upset domestic officials too much. According to Deputy Prime Minister Alexander Novak, the hydrocarbons produced in our country remain in demand and will be in demand in the future – we only have to change the supply chains.

On the one hand, Moscow has indeed found new routes for raw material exports. The total volume of Russian oil supplies to China in January-October increased by 9.5% and amounted to almost 72 million tons. In addition, in the fall, our country became the largest supplier of “black gold” to India, overtaking the traditional leaders in this indicator – Saudi Arabia and Iraq.

On the other hand, not all representatives of the leadership of the Russian financial bloc agree that the next sanctions will also be painlessly “swallowed” by the domestic economy, like many other measures put forward earlier by the West. For example, according to the bulletin of the research and forecasting department of the Central Bank, the oil price ceiling and the embargo on imports of raw materials to Europe risk becoming a new shock that could significantly reduce economic activity in Russia.

TeleTrade chief analyst Mark Goykhman agrees with this opinion. “Introduced in December 2022, a partial embargo on the sale of oil to the EU, and in March 2023 on oil products, will have a rather strong impact on our country. Until recently, the European Union accounted for more than half of the export of Russian “black gold” and oil products. According to Bloomberg, the losses of the national federal budget could amount to $22 billion. Income of about $6 billion from the remaining unembargoed supplies of raw materials through the southern branch of the Druzhba pipeline to a number of Eastern European countries – Hungary, Slovakia and the Czech Republic, will remain. In general, the potential reduction in sales of Russian liquid hydrocarbons to European countries in physical terms is estimated at about 2.5-3 million barrels of oil and 1.5 million “barrels” of oil products per day. In turn, the reserve capacity of the East Siberia-Pacific Ocean pipeline, Russia’s main export route to Asia, is only 300,000 barrels per day. About 200,000 more “barrels” can be delivered to Asia daily by rail. However, in general, these volumes are only 20% of the reduction in Russian oil supplies to the West. It will take time to expand additional export supply chains. It turns out that it is unlikely that our country will be able to quickly reorient raw material exports, so losses of billions, or even tens of billions of dollars, are inevitable,” the expert notes.