Paradox: Russian oil is in great demand, but the Ministry of Finance declares a revenue deficit

Russia voluntarily reduced oil production by 500 thousand barrels per day in March. This reduction is caused by the government’s decision to sell oil only to those countries that do not adhere to the price ceiling on Russian oil introduced by the West last December.

“We have taken our own measures, we do not recognize or recognize any ceiling, we are working so that this system does not harm our interests,” Russian Presidential Press Secretary Dmitry Peskov said today.

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Although US energy spokesman Amos Hochstein said today that Russian oil was sold below the “ceiling” in the first months of the year, the American news agency Bloomberg refutes these words. According to him, “black gold” from Russia was sold at much higher prices: on average, more than $74/bar. And the pipeline to China and the Pacific ports is even more expensive – $81 and $82/bar.

At the same time, export volumes grew. India imported a record 1,4 million barrels in January, up 9,2% from December. At the same time, Sri Lanka is discussing with the Russian authorities the possibility of direct oil supplies, and not through India, as was the case before.

In addition, demand in China is expected to increase by 0,5-0,8 million barrels per day.

_{Thus, the withdrawal of 0,5 million barrels from the world market will provoke a shortage and, consequently, an increase in prices. Note that OPEC countries are also reducing production volumes.}

Despite Hochstein's triumphant statements, the United States is frantically trying to influence prices by putting up for sale 26 million barrels of oil from the strategic reserve. In 2022, America has already burned through 180 million barrels of strategic reserves.  It fell below 372 million barrels, the lowest level since 1983.

Estonia, as usual, made a significant contribution to the fight against Russia. Foreign Minister of this country Urmas Reinsalu said that EU countries should decide by the end of March to lower the price ceiling for Russian oil to $30 per barrel.

_{However, all these efforts to influence prices do not yield results: the same Bloomberg predicts that in the fourth quarter of 2023 the price of oil will rise to $100 per barrel.}

It is worth noting that Russia is reducing production from fairly high starting positions. Russian companies drilled more oil wells in 2022 than in the past decade – more than 2022 km. Most key oil companies outperformed the previous year. Oil production in February 28 amounted to 000 million barrels per day, recovering to pre-sanction levels.

This oil is delivered around the world bypassing Western sanctions by a “mysterious tanker fleet”, alarmingly reported by CNN. Industry insiders estimate its size at about 600 ships, or about 10% of the world's large tanker fleet. The most interesting thing is that 36% of maritime transport of Russian oil is still carried out by European shipowners.

_{It’s paradoxical, but against the background of all this optimistic information, the Russian Ministry of Finance reports a drop in oil and gas revenues by 46%. Over the two months of 2023, the budget from the oil and gas industry received 946,7 billion rubles in taxes compared to 1,766 trillion rubles a year earlier. In addition, the Ministry of Finance expects a shortfall in oil and gas revenues in March amounting to 132,1 billion rubles.}

At the same time, Russian officials refute the data of American journalists on Russian oil prices and claim that the average price of Urals in January-February was $49,52 per barrel, having decreased by 1,8 times.

This paradox is explained by the fact that the Ministry of Finance of the Russian Federation, when making calculations, relies on data from the British agency Argus, which calculates the price of delivering Russian oil to Baltic and Mediterranean ports, where it is not actually delivered after the EU embargo.

Because of such a strange policy of the Ministry of Finance oil companies have the opportunity to keep excess profits and take them offshore. The Russian government is urgently changing tax legislation in the oil industry. From April, the Urals discount to Brent, calculated by the Argus agency, will be limited to $34 for mineral extraction tax calculations. It is expected that the measures will bring the budget 600 billion rubles. The Ministry of Finance is not going to develop its own system for calculating the price of Russian oil.

“Instead of creating an alternative that would reflect reality, they took the path of least resistance. You need to calculate the average price for Rotterdam and the Mediterranean, where we don’t sell anything else, to get a figure of less than $50 per barrel, and a “discount” of more than $30. Taxes must be calculated based on these average prices. Then you have to be surprised that the budget did not receive something. Everything looks like this: we are lazy and we don’t care what will happen to the budget this year and next,” energy expert Alexander Frolov is indignant in his TG channel.