The 70% drop in oil exports will leave Russia with no foreign currency to import

Russia’s foreign currency earnings have fallen as international buyers shun its crude oil after the country invaded Ukraine, eroding its purchasing power for imports.

The country is already facing a severe shortage of foreign currency after international sanctions froze the majority of its reserves. If oil-related revenue continues to fall, the country’s ability to pay for cars, semiconductors, and other widely imported goods will suffer.

So far, only a few countries have announced bans or other restrictions on Russian oil imports, including the United States, which is not heavily reliant on Russian oil. Energy transactions are also exempt from the sanctions that prevent certain Russian banks from using the international Swift payments network.

Nonetheless, Russian oil buyers are rapidly dwindling. Tankers leaving Russian ports totaled about 1 million barrels a day in capacity during the week through Saturday, according to research firm Refinitiv.

The total capacity of tankers bound for the European Union fell by around 70% to 80% in January, to 500,000 barrels a day. Fewer tankers are leaving for Japan and China as well, despite Beijing not imposing sanctions on Russia so far.

With declining demand, Russian oil from the Urals is priced more than 20% below North Sea Brent, the international benchmark.

The trend stems, in part, from potential operational risks. However, there are also ethical concerns. Shell, for example, will suspend oil imports from Russia after receiving criticism for buying Russian crude oil at a discount rate.

Oil and petrochemicals accounted for nearly 40% of Russian goods exports from January to September 2021. Therefore, a reduction of 70% or more in oil and petrochemical exports would lead to a decline of almost 30% in Russia’s total exports.

About 30% to 50% of Russian government revenues also come from the energy sector.

Source: Valor Econômico

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https://valor.globo.com/mundo/noticia/2022/03/10/queda-de-70-pontos-percentuais-nas-exportaes-de-petrleo-deixar-rssia-sem-moeda-estrangeira-para-importar.ghtml

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