Putin could collect $321 billion in windfall if oil and gas keep flowing through Bloomberg

© . Putin could bring in $321 billion if oil and gas keep flowing (Bloomberg) — Russia’s economy has stumbled through the first full month of the war with Ukraine, but it could still come with a scintillating balance sheet if some of its biggest trading partners are don’t turn off the tap on its energy exports. Despite all the hardships consumers face at home and the government’s financial stranglehold from abroad, Bloomberg Economics expects Russia to earn nearly $321 billion in energy exports this year, up more than a third from 2021. on track for a record current account surplus that could reach $240 billion, according to the Institute of International Finance. “The main driver of Russia’s current account surplus continues to look solid,” IIF economists led by Robin Brooks said in a report. “With the current sanctions, the substantial influx of hard currency into Russia appears to be continuing.” However, the calculation may change completely in the event of an embargo on the sale of energy. And even without that, Russia’s oil exports and output are already falling, with the International Energy Agency forecasting it could lose nearly a quarter of its crude production this month. Many of the country’s traditional customers are also looking elsewhere, choosing not to sign new contracts for Russian supplies, amid widespread condemnation of President Vladimir Putin’s aggression. Others, such as India, get huge discounts. The invasion of Ukraine has shocked Germany and its European Union allies into a radical shift in energy policy, and the bloc is rushing to reduce its dependence on Russia. For now, Europe’s largest economy is opposed to sanctions or political pressure that would lead to a full energy embargo. Only a handful of countries – including the US and UK – have imposed explicit import bans from Russia. Oil and gas account for about half of Russia’s exports and contributed about 40% to last year’s budget revenue. What our economists are saying: “Hydrocarbon revenues are a lifeline to the Russian economy, helping to cushion the impact of otherwise harsh sanctions and avert a balance-of-payments crisis. But even without an energy embargo, inflation is rising and a deep recession looms.” — Scott Johnson. Still, the combination of a sharp depreciation of the ruble and a higher dollar price for oil will generate an additional 8.5 trillion rubles ($103 billion) in fiscal revenue this year, according to TS Lombard. “The Treasury Department will use some of it to cushion the blow, but carefully, not to fuel inflation further,” said Madina Khrustaleva, an analyst at TS Lombard in London. “It looks like all these sanctions will destroy the non-energy part of the economy. Russia will be even more dependent on energy.” While the showdown over Ukraine has shaken energy supplies, the shock to imports and domestic demand will be so great that the current account, the broadest measure of trade and services, could hit a new all-time high after last year’s record $120 billion. Goldman Sachs (NYSE:) GS), whose upward revision for the current account surplus this year brings it to $205 billion, says it may be enough for the Bank of Russia to meet private sector demand for foreign exchange. and ultimately allow for the easing of capital controls. With Russian consumers already caught in a barrage of shocks from inflation to income erosion, Goldman economists predict imports will collapse by 20% this year, double the expected decline in exports. A healthy balance sheet won’t save Russia from a deep recession, but it will help sustain government spending at a time when governments have no access to international capital markets. Analysts at TS Lombard said the ruble’s exchange rate is effectively supported by current inflows as sanctions have frozen much of the central bank’s foreign exchange reserves. Russia’s ability to sell oil and gas abroad may be the only thing keeping the economy from descending into an even worse financial collapse. The IIF, an association of the world’s largest financial institutions, said an energy embargo by the EU, the UK and the US would cut output by more than 20% and Russia a staggering $300 billion in export receipts. could cost. depending on price fluctuations.

Leave a comment