The Russian economy has begun to show cracks as tight restrictions on exports of oil and gas took effect February 5 this year.
Russia’s January oil and gas revenues slid 46 per cent year over year as Western countries turned away from Russian supplies, according to the Senior Adviser For Oil Analytics Trade Flows and Modelling at S&P Global Platts, Tony Starkey,S&P Global economists expect that Russia’s gross domestic product will contract in 2023, in contrast to forecasts from the IMF, which projected a modest expansion.
That decline is expected to steepen as the February sanctions — which include a ban on Russian refined petroleum products in the European Union and a price cap on Russian crude established by the Group of Seven — take effect.
“Russia played the energy card and it didn’t win,” Executive Director at the International Energy Agency (IEA), Fatih Birol, wrote in LinkedIn post to mark the one-year anniversary of Ukraine’s invasion.
“Russia now faces the likelihood of further declines in oil and gas output in 2023 and a permanent loss of standing in the energy world,” he added. The value of Urals grade crude oil – Russia’s key export product — has fallen to record lows compared with the price of Dated Brent, which refers to physical cargoes of North Sea crude.
The new sanctions are also affecting global shipping flows of crude oil and petroleum products.
“Asia is preparing to see more Russian oil products flowing into the region following the EU ban that came into effect Feb. 5,” S&P Global Commodity Insights said, “while the supply squeeze in the West will create ample opportunities for Asian refiners to cater to those requirements and reap lofty margins.”
Shifting exports to Asia, however, will have limited effects in cushioning the blow of losing Western markets, Chief Geopolitical Adviser at S&P Global Platts Analytics, Paul Sheldon, said.
