Russia today continues to fully sell the entire volume of oil produced, but will not sell it to those who directly or indirectly support illegitimate price restrictions.
In this regard, the country plans to slightly reduce the production of raw materials in the near future, which was announced on Friday, February 10, by Deputy Prime Minister Alexander Novak.
“Russia will voluntarily cut production by 500,000 bpd in March.
This will contribute to the restoration of market relations.
When making further decisions, we will act based on the current market situation,” Novak said.
Recall that in December 2022, the European Union imposed an embargo on sea supplies of crude oil from the Russian Federation.
At the same time, the EU, together with the G7 states, banned its companies from insuring and transporting Russian raw materials to other regions of the world if the price in the contract exceeds $60 per barrel.
Since February 5, similar restrictions have been applied to oil products sold by Moscow for more than $45 and $100 per barrel, depending on the category of fuel.
As previously explained by the Western authorities, the establishment of price ceilings will limit Russia's windfall profits from the sale of hydrocarbons and supposedly have a positive impact on the entire global energy industry.
Moscow initially considered this idea ill-considered and repeatedly warned that they would cut off energy supplies to anyone who joined the restrictions.
“Absolutely stupid decision.
If someone tries to implement it, it will not lead to anything good for those who make this decision... Those who impose something on us are not in the position today to dictate their will to us... Deliver we won’t do anything,” Russian President Vladimir Putin said back in early September.
In response to the actions of the West, Moscow imposed a ban on oil supplies to those countries that require compliance with the price ceiling when concluding contracts, starting February 1.
In the near future, the same measures will have to apply to the export of petroleum products.
According to Alexander Novak, these measures should minimize the threat to the global energy market from the actions of Western countries.
“The mechanism of the price ceiling in the sale of Russian oil and oil products is an interference in market relations and a continuation of the destructive energy policy of the countries of the collective West.
In the future, it can not only lead to a decrease in investment in the oil sector and, accordingly, an oil shortage, but also be extended to other sectors of the world economy with similar consequences," the Deputy Prime Minister warned.
Deputy Prime Minister of the Russian Federation Alexander Novak
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© Komsomolskaya Pravda
Now Russian companies continue to actively reorient energy exports and have already significantly increased supplies to Asia, Africa, Latin America and the Middle East.
Nevertheless, it may take some time for businesses to completely replace Western, in particular European, buyers, so Moscow will have to cut oil production for the time being.
“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 earlier.
On my own terms
According to Russian authorities, in 2022 Russia increased oil production by about 2%, to 535 million tons. This is equivalent to the production of about 10.9 million barrels per day, as evidenced by data from the US Department of Energy.
According to American experts, since the introduction of new sanctions on oil, the volume of raw materials production in Russia has not changed much.
At the same time, in January, Moscow even managed to increase the supply of energy resources abroad after a short-term decline in sales in December.
“In many respects, crude oil has so far really managed to be redirected from European markets to others, primarily Asian ones.
True, this is accompanied by quite tangible losses in income.
Our oil began to be sold at a discount of more than 40% due to increased transportation and freight costs for tankers for longer routes compared to European ones, ”Mark Goykhman, chief analyst at TeleTrade, told RT.
Providing discounts in many ways allows Moscow to attract more customers and compete with other oil sellers in new markets.
Igor Yushkov, a leading analyst at the National Energy Security Fund, shared this opinion with RT.
At the same time, according to the expert, recently many buyers have begun to perceive the discount on Russian oil as a given and are beginning to set their own conditions for Moscow.
Against this background, the Russian authorities “decided to shake up the market” and reduce production somewhat, the specialist noted.
“Importers now often blackmail our suppliers and put them before a choice: either you sell us at a discount, or we will not buy the volumes that you need from you.
As a result, our oil exports have really grown, Russian companies still sell a lot, but budget contributions are decreasing.
The state does not like such a scheme,” Yushkov stressed.
According to the Russian Ministry of Finance, in January 2023, oil and gas revenues of the federal budget amounted to 426 billion rubles.
The value has almost halved (by 46%) compared to the same month in 2022.
“The authorities are sending a signal to the market that this situation does not suit us and therefore production will be reduced.
With this step, the Russian government makes it clear to buyers that either we come to some market indicators and gradually reduce the discount, or we sell less and you will have a growing shortage of raw materials, ”added Yushkov.
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© Vitaliy Timkiv
It is noteworthy that the countries participating in the OPEC + agreement are not going to increase their own oil production after Moscow's decision to cut production.
This was reported by Reuters on Friday, citing sources in the alliance.
As OPEC specialists noted earlier, at the moment there are simply no free capacities in the world to replace raw materials from the Russian Federation.
Against this background, immediately after Alexander Novak's statements about the decline in production, world oil prices began to rise sharply.
Thus, in the course of trading on the ICE exchange in London, a barrel of raw materials of the reference grade Brent rose in price by 2.9% to $86.89.
At the same time, the cost of the American WTI brand rose by 3.4% to $80.33 per barrel.
In search of a landmark
In addition to reducing production, in the near future Russia plans to revise the methodology for setting prices for oil and petroleum products and calculating taxes for companies.
Vladimir Putin gave the corresponding instruction to the government at the end of January.
As explained in the Kremlin, the initiative is designed to minimize the negative impact of sanctions restrictions on federal budget revenues.
The Cabinet of Ministers will have to prepare its proposals on this matter before March 1.
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According to the Ministry of Finance, in January 2023, a barrel of Russian raw materials of the Urals brand was sold at an average of $49.48, while the budget for the current year includes a price of $70.1.
Moreover, on the global market, oil was traded at an average of $80.4 per barrel, according to the materials of the World Bank.
It should be noted that today the information on the average cost of Urals oil is provided to the Russian Ministry of Finance by the international analytical agency Argus.
The company makes its calculations based on a survey of traders, at what approximate price do they buy raw materials from Moscow.
Meanwhile, the collected data relate only to sales in the European market, which has now lost its relevance for Russia, Igor Yushkov noted.
“The survey is about the sale of oil in Rotterdam and the Mediterranean, that is, in Europe.
However, now these data are not indicative, since we practically do not trade with the EU, ”the specialist explained.
Thus, the real cost of oil sold may be higher than the official $49.48 per barrel.
This means that the state earns less from taxes than it should, Yushkov noted.
A similar point of view was voiced on February 10 by the chairman of the Central Bank of Russia, Elvira Nabiullina.
“The Urals brand indicator does not reflect the real price at which Russian oil is currently exported, because exports through different ports and in different directions can vary, and we see how these prices have diverged... Of course, the question of the benchmark is acute.
I know that the St. Petersburg International Commodity and Raw Materials Exchange is currently working on this benchmark, we are participating in discussions, this issue is ... very important, ”Nabiullina said during a press conference.
In order to obtain objective data on the cost of oil sold, the authorities plan to switch to alternative price indicators.
In particular, the Ministry of Finance is considering the possibility of linking Urals quotes to the reference brands Dubai or Brent, which was announced the day before by Deputy Head of the Department Alexei Sazanov.
“I think by the end of February we will decide (with a decision on alternative quotes. -
RT
) ... I don’t see much difference - to be tied to Dubai or Brent oil, because they correlate with each other.
The issue is being discussed," the deputy minister quotes TASS.