Time 06.December 2023

Oil Games

Three quarters of sea transportation of oil from the Russian Federation already falls either on the “gray” fleet or on the shadow fleet at all.
The giants of the oil business, instead of the former straightforward brutality, are practicing more and more complex dances — logistics, contract and price.

Moreover, these dances are not at the forefront, but behind a curtain that is less and less transparent for the sanctions controllers.

An impressive counter march: Russian suppliers leave Europe for India, replacing the Saudis there; in turn, the Saudis are leaving India for Europe, filling the niche left by the Russians.

But not only export routes are changing. The composition of participants transporting oil is changing.

Three quarters of sea transportation of oil from the Russian Federation already falls either on the “gray” fleet (one flight is on, the other is off) or on the shadow fleet at all (flights are not taken into account in system statistics and in price quotations).

The real income from oil exports is masked: a significant part of the proceeds is formed after shipment in the Russian port and accumulated in foreign accounts.

Russian oil companies are taxed based on the price of $50 per barrel of Urals at the port of shipment. The real bottom line for the Russians, including the addition behind the scenes, is estimated at $80 per barrel.

According to Bloomberg, Russia has already accumulated $80 billion (about 6 trillion rubles) of shadow reserves abroad. This profit can be repatriated or used for imports.

What does this mean? Apparently, the budget catastrophe of Russia in 2023 does not yet threaten. Even if the deficit, as independent experts predict, will exceed the government’s forecast and reach 4.5 trillion. Taking into account the “shadow reserve”, the government can still cope with the growing deficit.

There are two keywords in this statement “yet”.

It will be much worse if this situation drags on for another year. And quite badly, if not for one year.

Sergey Stankevich

Sergey Stankevich

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