The head of Otkritie predicted a drop in oil production in Russia by 50 million tons

Due to the EU embargo, oil production in Russia in 2023 will decrease by 50 million tons, to 475 million tons. Mikhail Zadornov, head of Otkritie Bank, gave this assessment in an interview with RBC.The budget includes a more optimistic forecast - 490 million tonsMikhail ZadornovMikhail ZadornovMikhail Zadornov

Oil production in Russia in 2023 will decrease by 50 million tons, from 525 million to 475 million tons. Such a forecast was voiced in an interview with RBC by Chairman of the Board of Otkritie Bank Mikhail Zadornov. He explained this by the influence of the embargo, which the EU countries introduced on December 5.

In 2021, the EU and the G7 countries ( USA , Canada, UK, France, Germany, Italy and Japan) accounted for 68–70% of the total exports of Russian oil and petroleum products to the world market — 214.7 million tons were supplied there for a total $ 109.5 billion. In general, last year, crude oil and petroleum products accounted for 37% of total Russian merchandise exports, according to the data of the Federal Customs Service.

“It is not even clear where to supply this oil, but who will carry it, insure whether it will be possible to cope with the reorientation of oil flows from Europe and other unfriendly countries to Asian markets. This is a key issue in terms of GDP and balance of payments growth rates next year,” the banker said. According to him, this will "significantly" affect both the budget and the economy.

The budget, which was adopted when it was already known about the upcoming European embargo, included a more optimistic forecast for production for the next year - 490 million tons.

After the EU members agreed to refuse the supply of Russian oil by sea, as well as to introduce a ceiling on prices for it for third countries at $60 per barrel (G7 countries joined this decision), President Vladimir Putin said that Russia was considering the possibility of reducing production as one of the response measures, without naming exact indicators. And the Central Bank’s Research and Forecasting Department, in a weekly bulletin released on December 7, called the European embargo and ceiling on Russian oil prices a “new shock” that could “significantly reduce the level of economic activity” in Russia in the coming months. Sanctionsare always in the nature of shocks, whether economic or financial, as they disrupt supply chains and force production to decline, the study says. The restrictions also have a “long-term cumulative effect”, which over time reduces the potential of the economy “through a decrease in its productivity and efficiency”, especially in high-tech industries, experts of the Central Bank say.

But the Ministry of Energy did not agree with these conclusions. “In general, we do not agree that the introduction of a price ceiling is an event that will lead to significant consequences for the Russian economy. Most of the markets are available for our goods on adequate market principles,” said Pavel Sorokin, First Deputy Head of the Ministry of Energy. According to Argus Media, Russia has already managed to redirect a significant part of oil supplies from Europe to Asia. If in January, before the start of the military conflict in Ukraine, supplies to the EU accounted for 85% of the total offshore supplies of oil of the Urals reference grade - 5.16 million tons out of 6 million tons, then in September - only 24% (1.78 million tons out of 7.4 million tons). India increased purchases of Urals from zero at the beginning of the year to slightly more than 40% by the beginning of autumn, and Turkey - from less than 5 to 21%. In January-September 2022, India increased its purchases of Russian oil (not only Urals, but also the ESPO mixture transported to the port of Kozmino via the East Siberia-Pacific Ocean pipeline) by eight times, up to 20.5 million tons, follows from Indian customs statistics. According to Chinese customs, Beijing bought almost 72 million tons of Russian oil over the same period, compared to 65.7 million tons in the same period a year earlier.

Deputy Prime Minister Oleksandr Novak believes that a temporary decrease in oil production is possible next year, but a slight one: “We do not rule out that, if necessary, we may have situations associated with periods of oil [production] decline, since the situation is uncertain, volatility for today day. I don't think it will be big. Nevertheless, we do not exclude this, although we are doing everything to ensure that the situation is stable and the sale of oil is at the level of those [volumes] that we achieved in 2022,” he said.

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