Ursula Von der Leyen, President of the European Commission, met with Zelenski in kyiv on February 2. In the press conference after the meeting, the community leader showed her support for the Ukrainian president, affirmed that the Russian economy was suffering the consequences of the sanctions and informed of Brussels’ intention to have ready, by February 24, the day the invasion began, a tenth package of measures against the Kremlin.
For its part, the Russian Finance Ministry reported last week that oil and gas tax revenues in January fell to their lowest level since August 2020, Reuters reported. In addition, Russian Deputy Prime Minister Alexander Novak informed on February 10 of Russia’s plans to reduce its own oil production starting in March, according to the Russian news agency TASS.
Reduction from March. The cut will be 500,000 barrels per day, that is, 5% of the total production of Russian crude. In addition, Novak, who was Minister of Energy between 2012 and 2020, pointed out that this reduction was voluntary -ruling out that it was a consequence of Western sanctions- and that it will serve to “contribute to the restoration of commercial relations”.
It is not sold to those who adhere to the price cap. In this sense, Novak justified this decision in the Russian refusal to sell oil to those countries that “directly or indirectly adhere to the price cap principles.” Thus, the Kremlin, which according to the Russian deputy prime minister is managing to sell the entire volume of its black gold, will reduce its production starting next month.
Decision without counting on OPEC Plus. On the other hand, according to Novak himself and sources consulted by TASS, this decision by the Kremlin has not been consulted with anyone, not even with OPEC Plus, the organization that groups OPEC countries with ten other oil-producing countries between which are countries like Russia, Kazakhstan, Mexico and Oman and which controls 90% of the proven oil reserves according to Forbes.
Risk of fluctuations in the market. This issue is relevant because in October 2022, OPEC Plus announced a cut in oil production of two million barrels per day, thus reducing supply with the aim of stabilizing the price of a barrel of Brent at that time. In this sense, the cut announced by Aleksander Novak would cause a decrease in Russian production compared to the reference established by the organization, according to the British journalist Stanley Reed in an article published by The New York Times on February 10.
This could lead to an increase in prices. That is, in fact, what happened last week after Moscow’s decision to reduce its production of black gold was made public: the price of a barrel of Brent increased by 2.5%, reaching 86.6 dollars.
Consequence of Western sanctions. Some analysts have interpreted this move by the Kremlin as proof of the effectiveness of Western sanctions against the Russian economy. In this sense, experts from ClearView Energy Partners, a research company in the energy sector, stated in an article recently published by Axios that the decision represents a “milestone” and that, with it, Russia is directing its own weapon against the West at itself. .
Another reading: mere appearance. However, the fact that in 2022 Russia effectively withstood the sanctions, even increasing oil production by diversifying sales to Asian countries such as India and China, makes other experts more cautious. In this sense, Richard Bronze suggested in The New York Times that the Kremlin may be trying to give the impression that the reduction in production is not a consequence of Western sanctions, and that it has everything under control.
Excess oil. On the other hand, there are those who believe that this decision may be related to the abundance of oil available from Russia in recent weeks: “The excess is so great that it has to cut prices to find more stable demand,” said Craig Kennedy. , a fellow in Russian and Eurasian Studies at the Davis Center, told The New York Times.
Nonetheless. In any case, most experts point out that the latest Western sanctions have disrupted Moscow’s plans in relation to its oil exports, all this despite the doubts of many experts about the total income obtained by the Kremlin in this sector. .
The Bank of Russia, vigilant. In fact, the governor of the Bank of Russia, Elvira Nabiullina, gave a press conference on February 10 in which she expressed uncertainty about how the sanctions will affect her economic forecasts. Although it is early to tell, Russia’s ability to instrumentalize energy and use it against Western countries could be affected.