On Wednesday, February 1, a decree by President Vladimir Putin came into force in Russia on retaliatory measures against the decision of the West to limit the cost of oil from the Russian Federation.
According to the document, Moscow will not sell energy raw materials to those buyers who support the price ceiling.
“In order to protect the national interests of the Russian Federation ... the supply of Russian oil and oil products to foreign legal entities and individuals is prohibited, provided that the contracts for these supplies directly or indirectly provide for the use of a price cap mechanism.
The established ban applies at all stages of deliveries to the final buyer, ”the decree says.
Restrictions on oil exports will remain in effect until July 1.
In turn, the date of the introduction of a ban on the sale of petroleum products will later be determined by the government.
Before March 1, the Ministry of Finance and the Ministry of Energy need to approve the procedure for monitoring prices for oil supplied abroad.
At the same time, exporting companies will now be required to report to the authorities on contracts and the cost of raw materials sold.
This is stated in the decision of the Cabinet.
Recall that in 2022, after the start of a military special operation in Ukraine, Western countries imposed a number of economic sanctions against Moscow and began to refuse to purchase Russian oil one by one.
Moreover, since December 5, the European Union, the G7 states and Australia have banned their companies from insuring and transporting raw materials from the Russian Federation by sea to other regions of the world at a price higher than $60 per barrel.
From February 5, the same restrictions should apply to petroleum products.
The ban on the import of Russian hydrocarbons in the West was explained by the desire to reduce their energy dependence on Russia and put pressure on the Kremlin in connection with the Ukrainian events.
At the same time, the establishment of a marginal cost for raw materials is supposed to limit Moscow's excess profits from the sale of fuel.
The Russian authorities have repeatedly warned that they will cut off oil supplies to those who join the price restrictions.
Moreover, according to OPEC estimates, at the moment there are no free capacities in the world to replace raw materials from the Russian Federation.
Against this backdrop, Vladimir Putin has previously urged the West to change their minds, since any attempt to fix the cost of goods, according to the president, will not lead to anything good for the global energy market.
“This is the road towards the destruction of global energy.
There may come a moment when the underinvested industry ceases to provide the market with the required volume of products - and then prices will skyrocket and hurt those who are trying to introduce these tools, ”Putin warned.
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© Mikhail Klementiev
Ultimately, the West nevertheless decided to establish a price redistribution for Russian oil and intends to review it every few months.
Although Moscow's retaliatory measures have officially come into force only now, Russian companies in December began to refuse to conclude contracts where cost restrictions are prescribed, Deputy Prime Minister Alexander Novak noted.
At the same time, as the deputy chairman of the Cabinet of Ministers emphasized, today the business has no problems with the sale of raw materials.
“Yes, counterparties sometimes require that these contracts take into account the situation associated with limiting the price ceiling.
However, in the process of concluding contracts ... companies (authorities. -
RT
) were given the task in December and January and when contracting for February, so that they did not strictly take into account the price ceiling in contracts, because this may be a risk in the future, " Novak said.
A question of price
Today, Russian companies continue to actively reorient oil supplies.
According to Alexander Novak, enterprises have already significantly increased their energy sales to countries in the Asia-Pacific region (APR), Africa and Latin America.
At the same time, it may take some time for business to completely replace Western, in particular European, buyers, so Moscow will have to cut oil production somewhat for the time being.
According to the calculations of the US Department of Energy, in 2023, the production of energy raw materials in Russia could fall by almost 13%, or 1.4 million barrels per day.
However, according to Alexander Novak, the real decrease in the indicator will be insignificant and will amount to about 5-7%, or 500-700 thousand barrels per day.
“We believe that in the current situation, it is even possible to take the risks of reducing production, rather than be guided by the sale policy regarding the price ceiling.
Today it is $60, tomorrow it can be anything, and becoming dependent on some decisions made by unfriendly countries is unacceptable for us,” Novak explained in an interview with Russia 24 TV channel.
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© Ivan Fedorov
It is curious that at the moment Russia continues to steadily increase its oil supplies abroad, mainly to India and China.
According to Bloomberg estimates, in January, Russian companies exported an average of 3.34 million barrels of raw materials per week by sea.
The achieved figure was the highest since June 2022.
A positive trend is also noted by experts from the International Monetary Fund.
“With the current G7 oil price ceiling, Russian crude oil exports are not expected to be significantly affected as Russian trade is diverted from countries that have adopted sanctions to those that have not imposed restrictions,” the IMF study says.
Nevertheless, even in these conditions, the oil and gas revenues of the Russian budget remain below forecasts.
Thus, according to preliminary data from the Ministry of Finance of the Russian Federation, in January the state treasury missed about 54.5 billion rubles.
As experts explain, Moscow today is forced to provide significant discounts on its raw materials to attract buyers.
“Western restrictions have come into force, and we have finally switched to eastern markets.
They are more remote compared to European ones, which increases the cost of delivery.
Plus, we have to knock out competitors from new markets, which is why we make a big discount, ”Igor Yushkov, a leading analyst at the National Energy Security Fund, explained to RT.
According to the latest estimates of the Ministry of Finance, from December 15, 2022 to January 14, 2023, a barrel of Russian Urals oil was sold at an average of $46.82, while the budget for the current year includes a price of $70.1.
Moreover, the cost of raw materials of the Brent reference grade on the world market at that time fluctuated in the range of $77-87 per barrel.
Under the circumstances, the Russian Ministry of Energy announced plans to limit discounts on exported oil.
In turn, Vladimir Putin instructed the government to reconsider the method of determining the prices of raw materials for taxing companies.
However, according to Alexander Novak, in the foreseeable future, the discount will have to become smaller anyway.
“The cost of freight (oil transportation fees. -
RT
) has grown quite strongly ... I hope that this situation will be temporary, and the discount should decrease over time, as we observed during 2022, when in March-April the discount is strong grew, then it began to gradually fall and decreased by half, ”Novak explained.
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© Vitaliy Timkiv
adaptation phase
According to Igor Yushkov, after the final consolidation in Asia, Russian companies will no longer have to offer big discounts.
In addition, Moscow is now completing the formation of its own tanker fleet, which will be able to transport raw materials at any price, regardless of the western ceiling.
All this should lead to a reduction in the discount, the analyst is sure.
Igor Galaktionov, an expert on the stock market at BCS World of Investments, adheres to a similar assessment.
“Logistics is gradually being rebuilt, industry participants are adapting to new conditions.
This is a natural process, as a result of which the discount should be reduced and eventually return to fairer levels, ”the RT interlocutor suggested.
In general, the first half of 2023 will be a transitional period for the Russian oil industry, Igor Yushkov believes.
According to him, from February 5, Moscow may face new difficulties against the backdrop of the entry into force of the West's restrictions on oil products.
As a result, the export of energy resources from the Russian Federation may temporarily decrease, but will begin to recover in the second half of the year.
“As the global economy, and in particular the Chinese economy, recovers, we will see an increase in fuel consumption in the world, and exports will begin to increase again.
There will also be a high demand for energy resources in Europe, which will continue to buy our oil anyway, but only through India and at higher prices,” the expert concluded.