Russia's oil industry suffers significant blows as Ukraine delivers accurate attacks, according to an economist's assessment
Russia's economy, despite the tightening of Western sanctions, has managed to grow, albeit at a slower pace. The GDP is expected to slow to around 1%, and inflation remains above 8%. This economic stability, however, is under threat as the country's oil industry faces numerous challenges.
One of the significant issues is the lack of spare parts for oil refineries. Western companies like Shell, Axens, UOP, and Haldor Topsoe have ceased supplying these essential components since 2022. Currently, spare parts are sourced from Chinese production, but their lower quality and longer installation times limit their availability under current conditions.
Ukrainian strikes on the Russian oil industry are another pressing concern. These strikes, happening all over the country, are having a profound effect on the industry. They are expected to increase transport costs, cause discontent among the population, and require constant transfer of resources from region to region.
Russia, the world's second-largest oil exporter, is currently experiencing trouble due to a seasonal rise in demand and these strikes. To combat these issues, discussions are underway to create a missile defence system and anti-drone protection around oil enterprises. However, these measures could prove expensive.
To keep the budget deficit under control and preserve its reserves, the Russian government is considering raising the value-added tax (VAT) rate. Additionally, a significant portion of the workforce and 40% of revenues now go to defence and security.
Oil and gas revenues have accounted for between a third and a half of Russia's total federal budget proceeds over the past decade. However, according to economist Inozemtsev, President Putin is not overly concerned about these issues. He is reportedly confident that in a year or two, the West and Ukraine will collapse, and he wants to press on with the war.
In a surprising move, Russia has paused gasoline exports, with a full ban until 30 September and a partial ban until 31 October. This decision could further strain the already struggling oil industry and the economy as a whole. The coming months will be crucial as Russia navigates these challenges and seeks to maintain its position as a major player in the global oil market.
