Washington, D.C. - The Russian government has experienced a significant drop in oil revenues, amounting to almost 50 percent, during the first five months of this year, according to statements made by US Deputy Treasury Secretary Wally Adeyemo on Thursday. This decline comes six months after the implementation of a price ceiling.
In response to Russia's invasion of Ukraine, a coalition comprising the Group of Seven (G7) leading economies, the European Union, and Australia imposed a price cap of $60 per barrel of Russian crude in December. The objective was to curb Moscow's revenue while ensuring the continued supply of oil to the global market.
Adeyemo, speaking at an event held at the Center for a New American Security in Washington, emphasized that the decrease in oil revenue occurred despite Russia's increased crude oil exports. He stated, "Despite higher exports, Russia is making less money because its oil now trades at a discount of 25 percent relative to other global oil."
When asked about the US assessment of Russian revenues, an anonymous Treasury official stated that the United States relies on various tools, including monitoring market prices received by Russian oil exporters. Russian officials have acknowledged the pressure resulting from dwindling oil revenues but have not disclosed any plans for abolishing the price cap.
To mitigate revenue losses, Russia is currently exploring alternative taxation methods for its dominant oil blend, Urals. Rather than relying on market prices, Russian authorities are considering calculating taxes based on a fixed significant discount to the global benchmark, Brent crude. Adeyemo highlighted that this change effectively "locks in a massive discount because of the impact of the price cap."
Furthermore, Adeyemo stated that the ongoing war, coupled with sanctions and export controls, has posed challenges for Russia in replacing over 10,000 pieces of equipment that have been lost. The impact of these factors has further strained the country's economic situation.
The decline in Russian oil revenues raises concerns about the long-term implications for the country's economy. As Russia grapples with the consequences of the price cap and seeks alternative solutions to mitigate revenue losses, the global energy landscape remains uncertain. Analysts will closely monitor the developments in this situation and assess the potential implications for both Russia and the international oil market.
