Russia Monitor is a review of the most important events related to Russian internal and external security, as well as its foreign policies.
Date: 18 January 2023 Author: Grzegorz Kuczyński
Claims of High Oil and Gas Revenues Are Just Russian Propaganda
Russian Deputy Prime Minister Alexander Novak reviewed the performance of the country’s top energy sector in 2022. Moscow has prided itself on its oil and gas revenues that rose by a third from 2021. The thing is the 2022 figures do not include bad results that surfaced in late 2022 and tendencies notched up in January 2023. As Russian oil and gas prices are being affected, federal budget revenues are likely to shrink.
Russian Deputy Prime Minister Alexander Novak reviewed the performance of the country’s top energy sector in 2022. Russia increased its oil production by 2 percent to 535 million tons in 2022. Oil exports went up 7 percent while LNG––8 percent, compared to 2021. Russia’s gas supplies to China hit a record 15.5 billion cubic meters, up 48 percent. Russia’s budget revenues in 2022 from the oil and gas industry increased by 28 percent or by 2.5 trillion rubles. Novak indeed delivered true figures, but how he interpreted them could raise some doubts. Oil and gas traded high throughout most of last year before totally collapsing in late 2022. An increase in oil output by 10 million tons is a good result, especially amid ongoing sanctions, Novak added, noting also a rise of diesel and gasoline production by 6 percent and 4.3 percent respectively. In addition, the prices went up considerably. Yet it was only in early December that the real sanctions came into force, which did not influence last year’s figures. The European Union embargo on Russian oil came into force on December 5, 2022, setting a price cap of $60 per barrel. Russian President Vladimir Putin signed a decree banning oil supplies to countries that have introduced price caps on Russian oil. The price cap on Russian oil is costing the Kremlin $172 million a day and lost revenues will only rise. Between December 15, 2022, and January 14, 2023, Urals traded at $46.82 per barrel, down 18.5 percent from a month before. Throughout 2022, it traded at $76.09 on average. In short, the Russian oil price has been on a constant decline since October while oil export is a major lifeline to the federal budget. In addition to oil, other energy commodities have seen a decline in prices. In early January, the price of gas in Europe declined below $645, down 10 percent, per 1,000 cubic meters, marking the first decrease below the $650 ceiling since September 2021.
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