irie wrote: ↑Mon Aug 08, 2022 7:47 am
Count Steer wrote: ↑Fri Aug 05, 2022 12:50 pm
... It's an interesting one. The West has carefully avoided putting sanctions on oil and gas...so Putin has put them on himself. The resultant loss of income can't be balanced by a quick pivot towards China ...
Given that gas supplies to the EU have dropped to perhaps 25% of what they were in 2021, and gas prices have increased by at least 4 fold over the same period, then Putin's onto a nice fat earner.
I think the only need to 'pivot' elsewhere is driven by the physical need to keep gas fields open, unlike oil fields which can be 'capped' (but I could be wrong about this).
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Russian gas flows August 2021-2022.jpg
Gas volumes are only part of the story though. Market data on oil and gas traded show a drop to $14.9 billion in May - less than half what it was in the first month after the invasion. In large part due to the discount on oil China has exacted as sanction-buster of last resort and the increase in shipping cost due to insurance issues. Cutting gas flows will only add to that but, higher prices will indeed offset some of the loss and they cannot pivot much of the surplus to China.
If Saudi opened the taps on oil, Russia could make a loss per barrel if market price drops by $15/barrel.
However, those numbers apart, something is working because the Russian finance minister has acknowledged that there is a budget deficit of 2% of GDP (so it's likely to be higher than that if that's what he's owning up to!). To cover the deficit he's planning to dive into the National Wealth Fund ie withdraw 1/3 of it. They've doubled the money supply, inflation is 20% overall and 60% in some key sectors and foreign exchange reserves are down by $75 billion.
If the West can keep it together the Russian economic crisis will become a political one. As I said, winter is coming....who blinks first?