2023-11-09 23:00:13
Moscow will have no problem financing its army. The West’s capping of Russian oil prices, intended to curb the government’s war spending Vladimir Poutine, is losing more and more of its effectiveness. According to Wall Street JournalRussian tax revenues from oil and gas more than doubled in October 2023 compared to the previous month and increased by more than a quarter compared to October 2022. This is a radical change compared to the start of the year, when energy revenues fell.
The price cap, imposed in December 2022, was supposed to achieve a dual objective: ensuring the flow of Russian crude on world markets and thus keeping gasoline prices at a low level, while reducing Moscow’s revenues for every barrel sold. However, Moscow has found ways to get around it, transporting the oil on a fleet of aging tankers on which the restrictions have only limited influence. The discount at which Russian industry sells its oil to world prices has narrowed, increasing Russia’s war chest.
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The recent influx of oil revenues is helping to reduce Russia’s budget deficit. Economists now believe it is possible for the government to meet its deficit target of 2% of gross domestic product. In the spring, some economists expected a deficit of 5 to 6% this year. Reducing this deficit somewhat eases the government’s financing needs by reducing the need to draw on savings and issue expensive bonds. With exports increasing, Russia’s improving trade position is helping to reduce downward pressure on the ruble, which has stabilized against the dollar in recent weeks.
A record military budget
«Rising Russian oil prices suggest cap is increasingly unenforceable“, declared the World Bank in a rapport recent. The new oil windfall is helping Moscow finance its war in Ukraine and shore up its sanctions-hit economy, according to the World Bank and other economists. Next year, the government plans to increase military spending by almost 70% to a post-Soviet record of more than 93 billion euros.
With much of Russia’s oil trade now occurring outside its jurisdiction, the United States and its allies are now discussing ways to make it more expensive for Russia to develop and operate the oil flotilla. ships it uses to circumvent sanctions, these people said. The US Department of Justice is leading a vast campaign to crack down on violations of Russian energy sanctions.
Washington has offered port managers a list of recommendations that could increase costs for Russia, including requiring ships to prove they have properly capitalized insurance to navigate their waters, but it has not It is not certain that foreign shipping officials will follow the American suggestions.
Indeed, Russian oil companies and their commercial partners have responded by setting up their own transport network. According to a study by the kyiv School of Economics, Russia had a shadow fleet of 180 tankers transporting oil and oil products from Russian ports as of September. Its main customers, ChineIndia and Turkey, do not respect the price caps imposed by the West.
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