Board deficiency

In December, the Russian budget for the first time experienced a powerful influence of sanctions, but has survived - for now. We explain what will happen next

Sanctions on Russian hydrocarbons began to achieve their goal. Deliveries to Europe almost completely stopped, and prices for Russian oil varieties fell sharply. In December, this led to a record month of the budget - 3.8 trillion rubles. It was possible to fulfill the income plan largely due to the one -time payment of Gazprom of 1.2 trillion rubles.

But who will they want to “shake” the authorities this year? Moreover, the main blow is still ahead: the embargo on Russian oil products enters into force in February. The New Gazeta Europe tried to evaluate whether Russia can finance the war in 2023, taking into account the growing sanction pressure.

Did the sanctions really work?

Yes. Russian oil began to quickly become cheaper in December. According to the results of the month, the average price of a barrel of Urals was $ 50.4 per barrel (the fall continued in January). Some parties were sold for $ 37 per barrel. The previous three months Urals traded more than $ 20–25.

Oil prices of other varieties also decreased: the average price of the Brent reference brand in December was $ 10 lower than in October. But Urals fell down much more: the difference in price C Brent exceeded $ 30, although from November to August the gap was $ 22–24. Before the Russian invasion of Ukraine, Urals was cheaper for 1-3 dollars.

The spread between Urals and Brent increased by about $ 10 immediately after new sanctions entered into force on December 5. The main reason for the fall in the value of Urals, in addition to reducing world prices, is a European embargo, the president of the Institute of Energy and Finance (IEF) Marseille Salikhov notes in a conversation with Novo-Europe.

More about sanctions

Since December 5, the EU introduced an embargo for oil supplies, providing for several countries that receive oil through pipelines, extra time to refuse supplies. Also, the EU, the Big Seven, Australia and Norway introduced a ceiling of prices for Russian oil. This measure prohibits Western companies to maintain and insure sea transportation of oil in third countries if it is sold more than $ 60 per barrel. According to Salikhov, the embargo had a more significant impact on prices than the ceiling of prices.

According to IEF, the Urals discount to Brent reached $ 37 per barrel. The growth of the discount is mainly associated with the increase in the cost of freight (payment of tankers) to the end consumer, analysts of the institute believe: from the Baltic ports to India - 31 days, in Rotterdam - 7 days and 3-4 days to Poland. In addition, this is a fee for the risk that carriers of Russian oil go. The cost of freight is “sewn up” at a discount, explains Salikhov.

In addition to Urals, Russia exports other oil varieties. In particular, the East Siberian VSU, which goes mainly to China. He continues to bargain without any significant discount to the price of Brent, noted in IEF. But his share is small, 70–80% of physical oil supplies are a cheaper Urals, says Salikhov.

At the same time, the volume of oil exports from Russia by the sea has not yet shown a sustainable trend to decrease. Over the past four weeks, sea supplies have been on average at the level of the second half of 2022, Bloomberg wrote on January 23. The flows of Russian oil were reduced to Asia - mainly to India and China, Salikhov explains.

“Russian companies have to look for other buyers, they may have attracted a large discount,” he says.

On the annual results, the December fall did not affect very much. According to the results of 2022, oil production in Russia increased by 2%, exports-by 7%, said Deputy Prime Minister Alexander Novak.

That is, the budget withstood this blow?

According to the results of December, the budget formed a record monthly deficit of 3.8 trillion rubles. The point is not only the embargo: the budget expenditures in December jumped about three times. This is due to the fact that many budget expenses are transferred to the end of the year.

At the same time, a surplus has been accumulated over the previous months (557 billion rubles). The average price of Urals in January-December 2022 formed in the amount of $ 76 per barrel-$ 7 more than last year. Due to this, the Russian federal budget has fulfilled annual income plans.

The budget revenues last year amounted to 27.8 trillion rubles - 100 billion more than the plan. Oil and gas revenues over the year increased by 27.9%. All the rest - by 0.1%.

It is important that the oil and gas income includes dividends from the record profit of Gazprom. In addition, the government conducted the removal of the same Gazprom money that he earned before the war. In the form of taxes for mining, the state -owned company paid an additional 1.2 trillion rubles - half of its profit for 2021.

But the budget expenditures were still 2.2 trillion higher than planned. The Ministry of Finance revised the deficit assessment three times. At the end of September, a deficiency of 1.3 trillion (0.9% of GDP) was expected. On December 8, the department still revised the forecast, increasing the deficit rating to 2.9 trillion (2% of GDP).

As a result, it turned out to be even higher: over the year the budget did not receive 3.3 trillion rubles (2.3% of GDP). This may indicate that a sharp drop in oil prices was a surprise to the Ministry of Finance.

Barrel course to ruble
For the state, not only world oil prices are important, but how many rubles will eventually be able to enroll in the budget. It depends on the national currency course.

In December, the Urals barrel cost 3.3 thousand rubles, calculated the MMI telegram channel, founded by the current director of the department of monetary policy of the Central Bank Kirill Tremasov. This is the minimum value since the end of 2020. At the same time, the price of 4.8 thousand rubles per barrel is laid in the budget for the next year. In 2022, at the peak, its cost exceeded 9 thousand rubles.

The authors of the channel also calculated the “real” cost of the Urals barrel minus inflation. According to this indicator, it is at minimum values ​​in 10 years. The same price was in 2016, even lower fell only for a short time at the beginning of the pandemic. According to Salikhov, this calculation adequately displays losses for the Russian budget.

Can you use reserves?

To compensate for the budget deficit, the Ministry of Finance posted federal loan bonds (OFZ) and spent the National Welfare Fund (FNB). In just a year, 4 trillion rubles were spent from the fund. More than a trillion took the support of state corporations through the purchase of promotions and bonds. Among these companies are Russian Railways, Aeroflot, Rosavtodor. Over the year, the "liquid" part of the FNB (non -investigated in projects) decreased to 6.1 trillion.

The name "liquid" for the non -investigated part of the FNB remained from the past: after the introduction of sanctions against the Central Bank, dollars, euros, pounds, yena are frozen on his accounts. To “spend” them, funds from the FNB are virtually subtracted and printed. The main currency of the FNB was Yuan, who will play an important role in compensating for the budget deficit.

This is the only foreign currency in the FNB that has not fallen under sanctions, explains Tatyana Orlova, a leading economist in developing markets Oxford Economics.

- There is nothing more to conduct currency interventions, there is nothing special to spend. There is still gold, but the West imposed sanctions on it. It can only be sold to friendly countries. It is not very liquid, secondary sanctions can be acted, so China is not particularly striving to buy our gold for these reasons, says Orlova.

According to data at the end of the year, 309 billion yuan was stored in the FNB - about 3.1 trillion rubles, which is about half of the FNB.

In mid -January, the Central Bank said that he would begin to sell Yuan from the FNB. They will be directed to compensation for undisguised oil and gas revenues, the Ministry of Finance explained . This will happen in accordance with the new budget rule. It sets the target plan for oil and gas income in the amount of 8 trillion rubles per year. The deficiency will be compensated by the sale of currency from the FNB.

How the old budget rule worked

In the old budget rule, instead of the target amount of oil and gas revenues, the cutting price was set, which was indexed every year. Last year, it amounted to $ 44 per barrel. The earned over this amount was sent to reserves. If the cost of oil was lower, the government could use the FNB.

The budget rule was aimed at reducing the dependence of the economy and the ruble exchange rate on oil prices.

- Currency interventions began right now because the price of oil below the budget, income must be replenished from the FNB. At the same time, this supports the ruble so that it does not continue to weaken and does not contribute to the growth of inflation, ”said Orlova.

In January, the Ministry of Finance is going to sell to Yuan for 54.5 billion rubles, but admits that the amount of under -received income may be larger in connection with the decline in gas exports.

How long will Russia be able to finance the war?

Now it is not allowed to build confident forecasts that sanctions on oil products will begin to operate in February, Salikhov and Orlov say. According to their assessment, this will hit export supplies more painfully than restrictions on crude oil, and will lead to a decrease in oil production.

What are we talking about?

The United States and the Allies agreed to introduce two price ceiling on oil products from the Russian Federation, the Ministry of Finance said on January 21. The first price ceiling will touch oil products, which are usually traded with a premium in relation to raw oil (diesel fuel), the second for products that are traded at a discount (fuel oil).

In 2021, about half of the Russian export of oil products, in 2021. For example, almost the entire fuel oil, produced in Russia, went to Europe, Salikhov notes. In total, in 2021, Russia exported oil products for $ 70 billion.

Russian oil products are more vulnerable to sanctions, because they have more difficult logistics, Salikhov explains.

- The average tanker, which transports petroleum products, is about 3-4 times less than a tanker that transports raw oil. It turns out that logistics is more expensive. The main raw material markets for Russia are now China and India, and they have their own processing quite large. They are interested in buying raw oil with a discount and process it, ”he says.

As a result, Russian companies can partially refuse to process and sell raw oil.

“It is possible that the export of raw oil will remain stable, but production will be reduced due to a decrease in oil products,” Salikhov says.

You can predict the approximate amount of deficiency using the Ministry of Finance table with a scenario analysis of oil and gas revenues (depending on the volume of Urals production and price). The calculations are given on the basis of the course of 68.3 rubles per dollar.

The US Ministry of Energy and the International Energy Agency predict that the production in Russia will decrease from 10.7 million barrels per day to 9.5. Then, with Urals, the budget will not receive 600 billion rubles with $ 60, at 50 dollars - 1.6 trillion, with 45 dollars - 2.2 trillion.

The growth of the deficit is also threatened with additional budget expenditures, first of all, for war. According to the calculations of Novy-Europe, this year mobilized salaries and compensation for wound or death may require an additional 2-3 trillion rubles. However, it is very difficult to predict this.

- We cannot take into account various terrible scenarios, escalation, new waves of mobilization. If the situation will deteriorate, then you will have to lay higher military expenses, ”says Orlova.

For example, if the costs are above plans for at least 1 trillion rubles, the prices for Urals will remain at the current level, and production will fall up to 9.5 million barrels per day, this will lead to a doubt of the deficit - from the now planned 2.9 trillion rubles to 6 trillion.

This is approximately equal to the sum of the state -owned state and state loans in 2022 accumulated in the FNN Yuan. To cover such a deficit, the government will have to either sell all the yuan from reserves (that is, almost all of its foreign currency), or to occupy more significantly. Last year, the Ministry of Finance already took 3.3 trillion rubles through OFZ - 700 billion rubles more than a year earlier.

What else will the authorities “plug the holes”?

50 dollars for Urals is a rather dangerous price for the budget in the current structure, so the government will need to take additional measures, says Orlova. She admits that if the Central Bank had not begun the yuan intervention, it might have to increase the placement of OFZ.

- For a large amount of OFZ, you have to pay in large rates. Which also increases the load on the budget. This is an expensive measure. The moderate combination of loans and expenses from the FNB, says Orlova.

If the prices for Urals do not increase, the government will probably have to significantly reduce budget expenditures in the second half of the year or in 2024, the expert believes. According to Bloomberg, while the government is going to reduce only 150 billion rubles of expenses that are not related to defense.

At the same time, the authorities have other ways to find additional money. For example, they can go according to the scenario of the removal of money from Gazprom.

- There is still someone to shake. It is quite possible to imagine that the government will collect the leadership of large companies and say: “So, guys, you have earned a lot of money, share,” says Orlova.

Despite the decline in exports to Europe, and Gazprom itself can continue to remove some amounts, Salikhov believes.

- Exports are preserved to Turkey, China. Two -thirds of gas are consumed inside. There will be no supervisions and large dividends, but some profit from Gazprom will still remain. Plus in the domestic market you can increase gas prices. From December 1, the government raised them by 8%, ”he says.

The authorities have already approved a change in tax legislation, which will bring several more trillion rubles in the next three years from oil and gas companies. In particular, Gazprom is planning to additionally seize about 600 billion rubles in Gazprom. The tax on mining and income tax for manufacturers of LNG - from the current 20 to 34%are also increasing.

In addition to this, the government wants this year to “mobilize” funds from fertilizer and coal producers using one -time payments and increased dividends, Bloomberg wrote .

- There are other sectors of the economy that can be forced to share, for example, to tax a one -time tax. It will be easier at some point to solve it “according to concepts”. If this is done in a one-time format, it will hit less at the request of the business at all to do something in Russia, ”Orlova believes.