In a year, russia may simply run out of money – Olena Pavlenko
Despite the fact that last year was very profitable for russia, the year of 2023 will be very problematic financially. Olena Pavlenko, President of the DiXi Group Think Tank, told about it during the expert panel discussion “EU sanctions on Russian fossil fuels: strengthening enforcement and closing loopholes”.
“minus volume, plus price” – this is how the formula looks like, according to which russia influenced the price by reducing gas supply volumes. Such a strategy provided excess profits to the aggressor state last year. But the trend may be the opposite this year. As soon as European countries found a substitute for russian gas, gas prices dropped more than three times,” said Olena Pavlenko.
According to the expert, the same trend is observed in the oil industry. When russia tried to apply its “minus volume, plus price” formula to the oil market, it did not work. The market barely responded to recent statements by the russian government about reducing oil production to 500,000 barrels per day.
“This means that the EU and the G7 can continue to reduce the price caps on russian oil and not be afraid of the shock that occurred at the beginning of last year. A further decline in russian oil prices will be much more painful for the russian economy. And if the EU wants to end the war as soon as possible, then the reduction of price caps should continue,” added Olena.
At the beginning of autumn, the government of the russia federation obliged Gazprom to pay a special tax of RUB 417 billion to cover the growing budget deficit. And this happened even before the introduction of EU price caps. The effect of their introduction became very noticeable. In January 2023, the budget deficit amounted to USD 25 billion, which is almost 60% of the annual budget deficit. Tax revenues from the sale of gas and oil fell by 46%, and non-energy revenues fell by more than 20% for 2022. At the same time, expenses have increased significantly – russia is financing the war, and this requires a lot of money.
“Pay attention: russia formed the budget based on the oil price of USD 70 per barrel, and it is trading at the level of USD 50 already in January. It means that if we take into account the results of the first month and add to them the results of sanctions on oil products, it becomes obvious that russia will end the year with a huge hole in the budget, which will significantly exceed the official forecast. Experts forecast that the deficit will amount to USD 70-80 billion. If the sanctions pressure against russia continues, it will have enough reserves for a year or a little longer. It simply may not have any money left,” said Olena Pavlenko.