Bloomberg: Pricing limit of Russian oil won’t affect Moscow’s revenues

Bloomberg newspaper said that “the G-7 pricing limit on Russian oil exports isn’t low enough to affect a large part of the Kremlin’s revenues next year”.

Even if this leads to a drop in crude oil production, Vladimir Putin still has plenty of cash for the war, at least for the time being, according to economists.

The economist Sofia Donets, in Renaissance Capital, said that “at $60 a barrel, the maximum price seems very generous,” commenting that “the price is close to what was priced by the market for the year 2023, and the level proposed in Russia’s budget”.

Bloomberg newspaper pointed out that “European officials promoted the ceiling, which was negotiated last week after months of bargaining between the United States and its allies, as a way to starve the Russian war machine”.

Bloomberg pointed out that “the pricing limit wasn’t so low that it would push the Kremlin to significantly reduce production, which could lead to a rise in international prices”.

Bloomberg stated that “Russia hasn’t yet announced its response, but officials say that they plan to continue diverting the flows to countries, such as China and India, that haven’t officially signed the price limit”.

Even without the price cap, along with shipping and insurance restrictions aimed at hampering Russian trade, the Kremlin would have expected a roughly 25% drop in tax revenues from oil and gas with lower production and some prices.

“Even with higher spending on the war, Russia has been able to easily cover its budget deficit by tapping into its wealth fund and borrowing from the domestic bond market, as sanctions leave investors with few alternatives”.