By KYIV. Dec 2 (Interfax-Ukraine) – Russia will reach a critically low level of oil and gas revenues to the budget in the first half of 2023 if the market price for its oil is artificially limited to $30-35 per barrel, according to a study by the Yermak-McFaul international working group on sanctions against the Russian Federation.
The corresponding text of the study was posted on the website of the President’s Office under the title "Working Group Paper No. 10: Implementation of the Oil Price Cap."
"Already from December 5, Russian oil will be sold at a price no higher than the price cap, which will limit Russia’s income from the sale of oil and its ability to finance the invasion of Ukraine. However, the issue of the size of this price cap is still not resolved by the sanctions coalition partners. The research carried out by experts of the sanctions group, including such well-known experts as Craig Kennedy, Edward Chow, Elina Ribakova and Jacob Nell, lays out arguments and calculations that convincingly confirm the need to establish a price cap of $30-35 per barrel," the report says.
"Experts describe two scenarios for implementing a price cap: hard and soft. With the implementation of the soft option, Russian oil and gas revenues will increase from slightly less than $250 billion in 2021 to $350 billion in 2022. In 2023, revenues will decrease to $165 billion, and in the second half of 2023, the quarterly rate of decline will reach $50 billion, which is already a problematic level for the Russian economy. However, in the scenario of severe sanctions, under the condition of a larger discount on oil, a decrease in revenues to a record low level of about $100 billion is foreseen, which will be a catastrophic 8-10% of GDP for Russia," according to the document.
"Thus, in 2023, under the baseline sanctions scenario with an oil price cap, Russia will have significant difficulties in financing its balance of payments and budget. However, under the implementation of the ambitious scenario, which assumes a price of $30-35, the Russian Federation will reach a critically low level of oil and gas revenues already in the first half of next year," it reads.
