“Putin’s Reaction to Russia’s Falling Oil and Gas Revenues Amid Western Sanctions”

The unusual confrontation took place during a video conference on May 17. Then the Russian government gathered to give the president the latest updates on, among other things, the economic situation in Russia.

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When Finance Minister Anton Siluanov took the floor, he touched on the failing oil and gas revenues as a result of the tough Western sanctions.

– As the situation is now, we have achieved around 30 per cent of the annual income, while the annual expenses are up to 39 per cent. We will therefore have a temporary imbalance that should be balanced during the year, Siluanov told the president in front of an open camera.

Minister of Finance: Oil revenues have fallen by more than 50 per cent

The case has been discussed by, among others Financial Times and The Independent.

The finance minister did not hide the reason for the economic disaster Russia has found itself in. Siluanov said bluntly that oil revenues had fallen by more than 50 percent in the first quarter of this year, leading to a large trade deficit.

– Russia’s other income is growing according to plan, with the potential for it to have gone marginally better than expected at the turn of the year. But there is a problem with the energy revenues, Anton Siluanov informed the president and the rest of the Russian government collegium.

– Voluntary production cuts

After this financial summary, Vladimir Putin clearly expressed his displeasure. The official version from the Kremlin is that Russia is doing just fine despite the West’s attempts to isolate Russia, and that the country has found other partners to fill the void after energy exports to Europe have completely dried up.

– All our actions, including those related to voluntary production cuts, are connected with the need to support a certain price environment on global markets in contact with our partners in Opec+, replied Putin.

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Putin: – The situation is stable

The president argued that the economic situation in Russia is “absolutely stable”, and that the lower incomes are due to “voluntary cuts” in oil production in consultation with Russia’s Opec+ partners.

Putin’s attempts to play down the failure in oil and gas revenues are being noticed. That the presidents do not trust the country’s own finance minister is nothing new. In the past, too, Putin has put his own top staff in place and humiliated them in front of the public. But it testifies to division and disagreement within the government.

Staggering Russian losses

The reason for Russia’s declining revenues is that Russia has been forced to sell crude oil at deep discounts to make up for the loss of energy exports to the rest of Europe. China and India are two of the countries that have benefited from these discounts. At the same time, the cheap sales have caused enormous revenue losses to Russia.

According to Business Insider the total Russian losses amount to close to NOK 300 billion in the first four months of the year alone. The loss is nevertheless smaller than at the same time last year, largely thanks to exports to China, India and other friendly countries.

Scientists: Russia will get rid of the oil, but at low prices

Researchers at the Kyiv School of Economics estimate that about 75 percent of the decline in Russia’s income can be attributed to Western sanctions, and not market prices.

According to commodity analysis firm Kpler, Russia appears to have few problems finding buyers for its crude oil and oil products, the IEA has mentioned in a report. These buyers today account for approximately 90 percent of all purchases of Russian oil, while Europe has found alternative supplies to make itself completely independent of Russian energy imports.

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