A blessed land of hydrocarbons, Russia relies largely on revenues from the sale of oil and gas to balance the state budget and finance its expensive war on Ukrainian lands. According to estimates reported by Le Monde, revenues from hydrocarbons cover, according to estimates, between 30% and 50% of Moscow's budget.
Falling oil income
The importance of this windfall also explains the determination of Western countries allied to kyiv to sanction Russian fossil fuels: no less than 14 sets of sanctions have been adopted by the European Union. If “petroroubles” continue to flow into Russia – the product of the black and illegal fleet of oil tankers which ply the seas, and of the expansion of the Chinese and Indian markets – the source shows signs of weakness.
Russia: on the gas route, from the Caspian to the Black Sea
Thus, Bloomberg reported on November 5, in October 2024, Russia's oil revenues decreased by 29% compared to the previous year, painfully reaching 1.05 trillion rubles ($10.7 billion).
Stifled by sanctions, shunned by certain Asian markets frightened by secondary American sanctions, the refined oil offered by Moscow is selling less well, and the income of Russian refineries is being affected – not even counting those seriously damaged by drone attacks. came from Ukraine.
Small refineries in danger
Several of them are showing problematic results, and some could even close shop as early as early 2025. Three Russian refineries — located in Tuapse, Ilsky and Novoshakhtinsky — have been forced to reduce their production or suspend it at times, told Business Insider five people who worked in these factories. The last two operations, two small independent refineries, processed between 60,000 and 70,000 barrels of oil per day this year — about half their usual volume — for several months.
The losses particularly impact small, low-tech refineries, which do not produce fuels. premiumsaid two of those interviewed. For these companies, losses reached up to 10,000 rubles ($99.34) per metric ton in the second half of this year.
Added to the drop in demand, and therefore prices, on European markets is the rise in the price of crude oil, a raw material for refineries which then transform it into finished products such as diesel, gasoline or other fuels. . The profit margin of refineries has contracted, forcing them to borrow – for more money, the Russian central bank having raised its key rates to 21% – to continue their production.
Towards a maxi oil group?
At the same time, the difficulties encountered by Russia in the hydrocarbon sector are pushing certain members of the government to consider a merger in the kingdom of the oil titans, we recently reported. Thus, those close to Putin are planning to bring together the large fossil resource companies under the authority of the state.
According to information from the Wall Street Journal, Energy Minister Sergei Tsivilev has proposed that the state giant Rosette absorb the public producer Garum Neft – a subsidiary of the natural gas exporter Gazprom – and the independent group Lukoil, according to sources close to the matter. All three companies are currently under US sanctions.
The key: close ministerial supervision of large groups – traditionally led by powerful allies of Putin, such as the CEO of Rosneft, Igor Sechine, and that of Gazprom, Alexei Miller – and an elimination of competition which drives higher prices for customers like India and China.
Will this be enough to get Russian oil out of this mess? Nothing is less certain, because a “maxi” Russian group would attract more attention from Western countries, and new sets of sanctions…
