A mixture of rising oil prices will combine with increased demand for Russia’s discounted crude, pumping up oil exports. Those exports will raise Russia’s earnings from oil 38% to $337.5 billion this year, according to a report by Reuters detailing a Russian government document projecting yearly energy profits for 2022 and 2023.
That increased revenue will help Russia’s economy overcome the effects of a series of Western sanctions over its invasion of Ukraine. As Russia endures recessionary forces and inflation wracks Russian consumers, the increased revenues will supply President Putin with cash to boost wages and pensions, as he funds military operations in the Ukraine.
Still some sectors of the Russian economy will have trouble escaping the effects of sanctions.
Janis Kluge, senior associate at the German Institute for International and Security Affairs noted, “The impact of sanctions on Russia’s economy is very uneven. In some sectors, it has been catastrophic, such as the car industry. The oil sector is relatively unscathed for now.”
Kluge noted that finance and IT have also been hard-hit by sanctions, saying, “These sectors have had the strongest links to the West and are consequently suffering the most.”
The document estimates energy export earnings will lower slightly in 2023 to $255.8 billion, however that is still higher than the $244.2 billion earned in 2021.
The Russian Economy Ministry, which produced the document, declined to comment.
Other details from the forecast include an estimate that the average gas price will double this year, before beginning a gradual decline until the end of 2025.
The document also predicts Gazprom’s pipeline gas deliveries will fall to 170.4 billion cubic meters, (bcm) compared to the May forecast of 185 bcm, and 2021’s export volume of 205.6 bcm.
Russia’s oil production has been growing as Asian buyers have flocked to its discounted crude despite sanctions. This led the document to predict Moscow will increase production and export volumes until the end of 2025.
Although the document notes deliveries to China have increased, it does not note by how much. Europe still remains the biggest consumer of natural gas.
Overall the documents point to Russia’s economy faring far better under current sanctions regimes than anyone would have predicted. At one point Russia’s Economy Ministry had predicted that sanctions would trigger up to a 12% contraction in the Russian economy, which would have been the biggest fall in economic output since the collapse of the Soviet Union.
However it now sees Russia’s economy contracting only about 4.2% this year, and real disposable incomes falling 2.8%.
