Russia failed oil exports: revenues from supplies fell by one and a half times

Sanctions and discounts made a hole in the federal budget

Western sanctions on the Russian energy sector continue to deal an extremely painful blow to the federal budget. According to the International Energy Agency (IEA), our country’s income from oil exports in the first half of the year decreased by more than one and a half times. If in January-June 2022 the proceeds from foreign supplies of “black gold” to Russia exceeded $120 billion, then the corresponding period of 2003 brought a little more than $77 billion. What are the consequences of such a sharp drop? What can be done to reduce the decline in income? What will happen to them in the second half of the year? We addressed these questions to the experts.

– How much can you trust the IEA data? From what sources does the agency draw its information and does it take into account the oil supplied by Russia’s “shadow fleet”?

Igor YUSHKOV, Leading Analyst of the National Energy Security Fund, Expert of the Financial University under the Government of the Russian Federation:

“Foreign statistical and specialized services, apparently, are very pleased to compare the current data on income from Russia’s raw material exports with last year. However, in this case, it is worth considering the so-called “high base effect”. In other words, it is necessary to evaluate last year’s situation on the world oil market. In the first half of 2022, she favored hydrocarbon suppliers, as barrel quotes could exceed $100. Now oil is only pulling up to this level – since January, the cost of a “barrel” has been steadily in the corridor of about $75-80. Moreover, the discount on our “black gold” supplied in the Asian direction, although significantly reduced, but continues to persist. The statistical situation will change in the second half of the year. In the second half of 2022, the discount on raw materials exported to India and China reached its maximum, so even with the reduction in exports, which Russia voluntarily accepts, income from foreign hydrocarbon supplies will no longer differ so noticeably from last year.

Artem DEEV, head of the analytical department at AMarkets:

“The Federal Customs Service of Russia stopped publishing data on exports and imports back in March 2022, after the West imposed sanctions. Nevertheless, the Ministry of Finance regularly publishes data on oil and gas revenues, including from the export of oil and oil products. It is likely that the IEA takes its data from just these sources. In addition, the American profile service can use the import statistics of the countries that buy Russian oil. The volumes of exports by the “shadow fleet”, of course, can also be taken into account, but only as additional information, since its reliability is difficult to verify.”

Andrey LOBODA, economist, director of communications at BitRiver:

“Russian oil exports have indeed dropped noticeably. The main reason lies in the voluntary reduction of exports by a total of 1 million barrels per day. The average Brent oil price in June was at around $74 per barrel, that is, almost 30% lower than in June 2022, which caused concern not only for Russia, but also for our partners in OPEC +, who also decided to voluntarily cut . Specifically, in our country, due to the “ceiling” of oil prices and changes in the structure of consumers, the discount of the main export grade Urals to the North Sea brand Brent was about $30 per barrel. In a number of Asian countries, to which Russia is increasing the supply of “black gold”, demand in June turned out to be at a rather modest level due to the slow recovery of the economy after the pandemic. Russian oil exports will most likely start growing in the fourth quarter of this year, when the market deficit is expected to widen.”

– Will Russia be able to reverse the negative trend and through what measures – to increase export deliveries, further increase in prices for our raw materials? Or do we just have to wait for the lifting of sanctions?

YUSHKOV:

“Under the current conditions, our country is not able to have any fundamental impact on budget revenues from raw material exports. This is largely due to global demand for oil, forecasts for which remain highly ambiguous. On the one hand, many experts believe that due to a significant reduction in the supply of raw materials to the market from Russia, Saudi Arabia and other producing countries from OPEC +, as well as a possible increase in consumption by the Chinese economy after the removal of pandemic restrictions, there may be a shortage of energy resources supply. On the other hand, the United States and Europe continue to experience unprecedentedly high inflation, which is why the Western economy is teetering on the brink of recession. The US Federal Reserve and the European Central Bank promise to continue raising interest rates. Moreover, in the Old World, the interest rate may soon increase significantly. Accordingly, the flow of money supply to stock exchanges will decrease, and market players simply will not have the financial resources to buy oil futures. Then the opposite situation will be formed – suppliers will be forced to fight for each buyer.

It is worth noting that the Russian government is looking for ways to increase revenue from the sale of hydrocarbons. One of them is the reduction in spending on the commodity sector. In particular, from September 1, the government is going to halve payments to mining companies for the fuel damper. Such a decision will reduce cash receipts to the industry, but promises to bring to the treasury up to 50 billion rubles a month. True, there is reason to believe that as a result, an additional financial burden will fall on the shoulders of ordinary Russians, since the reverse side of the reduction in payments to oil workers under the damper may be an increase in retail fuel prices that exceed the inflation rate.”