The Russian government can easily use the fund for the rainy days and make it active from the invasion of Ukraine and the western sanctions that have crippled the Russian economy and led to double-digit inflation and the highest price in two decades.
Russia’s oil and gas revenues, however, continue to flow and exceed previous budget forecasts, as the war in Ukraine has pushed oil and gas prices soaring. The EU, the US and the United Kingdom aim to reduce oil flows to Russia through embargoes and bans.
The biggest blow, the latest EU sanctions package, bans oil imports from Russia for eight months and also bans EU insurance companies from providing insurance for Russian oil that goes anywhere in the world. The insurance ban could be a knock-out blow to Russia’s oil exports, as it would cripple Russia’s ability to export crude anywhere in the world, analysts say.
The market will see a dramatic shift with this ban within six months, but until then, money from oil is flowing to Russia at a high rate.
Russia expects to receive up to $ 6.37 billion in additional oil and gas revenues in June, its finance ministry said last week as energy prices soared from Russia’s invasion of Ukraine.
While oil revenues are flowing, the Russian economy is pooling due to Western sanctions, double-digit inflation and a significant reduction in consumer purchasing power.
Last month, the Russian federal government said it would raise minimum wages and pensions from June 1 as it seeks to address the effects of double-digit inflation, which is closely linked to Western sanctions. Many Western companies have left as a result of sanctions as well as due to the pressure of reputation, contributing to the adverse effects of sanctions on Russia.
By Tsvetana Paraskova for Oilprice.com
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