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The Russian budget is likely to remain without oil revenues

Российский бюджет рискует остаться без нефтяных доходов

The reduction in the price of Russian export oil Urals to the level of less than $15 per barrel will lead to a sharp decline in oil revenues, warns the chief economist at Vygon Consulting Sergey Ezhov.

Earlier today it became known that the price of Urals in the course of yesterday’s trades reached a new record following the reduction in price of standard grade Brent, said “Finmarket”. As follows from the calculations Argus, the price of Urals in Northwest Europe (SZE) in absolute terms fell by $3,20 per barrel compared with Friday to its lowest level since March 1999 — $13 per barrel (CIF Rotterdam).

As pointed out by Yezhov, when the price of Urals export duty on oil and oil products are zero, revenues from tax on mineral extraction (met) will drop to about 240 billion rubles, RBC reports.

For comparison: in 2019, the Federal budget received from export duties on oil and oil products 1.6 trillion roubles from the severance tax on oil and 5.2 trillion rubles, or almost 35% of all revenues, said the expert.

However, in March, a sharp decline in revenue is not threatened, for tax calculation is used the average price of Urals for the month, and it is above $15 per barrel.

Also on 20 March, the Minister of Finance of the Russian Federation Anton Siluanov assured that the current oil prices (Urals then was worth about $23 per barrel) Russia has enough margin of safety for 6 years.

For its part, the senior analyst “BKS the Prime Minister” Sergey Suverov says that “the threat to Russia is the possibility of maintaining low oil prices for quite a long time due to a price war neftepererab, which limits the possibility of large-scale anti-crisis budget measures like the Western countries in terms of the likely recession in Russia.”

“Also limited the possibility of monetary incentives in Russia from the Central Bank amid the acceleration of inflation after the devaluation of the ruble. Therefore, the crisis may hurt more to hit Russia than to the West, while exporters with a weak ruble remain little more than a privileged position,” — said in the review suverova.

Add that with the beginning of this year on the global oil market rode several waves of falling prices for “black gold”. So, if in the beginning of January, a barrel of Brent cost about $65 in mid-February fell to about $58, and West Texas — up to $53. However, in early March, the price has fallen. The negative situation caused by a whole complex of factors: a General overproduction of raw materials, a sharp drop in demand due to the rapid spread of coronavirus infection COVID-19 (March 11, was declared a pandemic) and concerns about its impact on the global economy and the collapse of the deal, OPEC+ (after fruitless negotiations of the countries-oil producers at a meeting on March 6 in Vienna). Just last circumstance was the trigger to the collapse in oil prices. Moreover, Saudi Arabia announced plans to increase production and lower oil prices. Later, the desire to lower the prices declared Iraq, Kuwait, UAE and Nigeria.

In the week from 16 to 22 March, the price of WTI fell by 29.3%, the biggest weekly decline since 1991. For the week Brent lost 20.3 percent. Since early March, oil prices have fallen by about 50%.

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