Putin instructed Novak to figure out how to reduce the impact of oil discounts on the budget

Deputy Prime Minister Alexander Novak believes that the discount on Russian oil is one of the main risks, along with the embargo and price ceiling. President Vladimir Putin has instructed him to look into ways to reduce the impact of the discount on the Russian budget.

“We need to look at this discount so that it does not create any problems with the budget. Discuss, then please report your proposals to me separately,” Mr. Putin said at the meeting.

According to Mr. Novak, the main reason for the discount on Russian oil is the high cost of freight. “The cost of freight has grown quite strongly, due to the risks that carriers and counterparties experience regarding possible sanctions in accordance with the fact that they have not set a price ceiling. I hope that this situation will be temporary and the discount should decrease over time, as we observed during 2022, when the discount grew strongly in March-April, and then it began to gradually fall and halved,” said vice premier.

Mr. Novak said that some contractors are already demanding that the terms of the price ceiling be written in contracts. However, the authorities set a condition not to take into account this limitation.

From December 5, 2022, the European Union, the G7 countries and Australia have set a price ceiling for offshore supplies of Russian oil – $60 per barrel. Vladimir Putin, by his decree, banned from February 1 the supply of oil and oil products at the price ceiling without his personal permission.

Against this backdrop, the cost of Urals oil fell to $37.8 per barrel, while Brent cost $78.6, Bloomberg reported. Russian authorities do not rule out introduction of additional measures to limit the discount on Russian oil.

On the risks of low oil prices – in the material “Kommersant” “The budget is in danger of underfilling”.

Leonid Uvarchev