Ermak-Macfola sanction group has published a research on the price limitation of Russian oil

International Working Group on Sanctions against Russia, headed by the Head of the Presidential Office of Ukraine Andriy Yermak and Director of the Institute for International Research Friman-Pogli (FSI), former US Presidential Security Advisor Michael McFol, published a research on pricing of Russian oil " Document of working group No. 10: introduction of the marginal price for oil ».

From December 5, Russian oil will be sold at a price not greater than the marginal, which will limit Russia's income from oil sales and its ability to finance the invasion of Ukraine. However, the issue of the size of this marginal price has not yet been resolved by partners in the sanction coalition.

In a study of experts of the sanction group, including such experts as Craig Kennedy, Edward Chou, Elina Rybakova and Jacob Nall, arguments and calculations are given that convincingly confirm the need to set a marginal price of $ 30-35. US a barrel. According to the authors of the study, this will reduce Russia's income from oil and gas exports to $ 100 billion. And immediately it will cause serious financial pressure on the Russian Federation.

At the same time, such a price for Russian oil remains higher than the average cost of production in Russia ($ 10-15 per barrel), which saves incentives for the Russian Federation to supply oil. The coordinator of the sanction group Andriy Yermak said: “I consider convincing arguments that the price should be limited at $ 30-35. In any case, Russia will try to blackmail the world and not sell oil into markets.

However, it is not possible to completely abandon oil exports, and third countries will take advantage of the discount to the same level of marginal price. Therefore, if our partners show enough persistence and patience, the markets will quickly adapt, and Russia will inevitably become the main louse. " Experts describe two price limit scenarios: hard and soft. With the implementation of the soft variant, Russian oil and gas income will increase from just less than $ 250 billion.

In 2021, up to $ 350 billion. In 2022. In 2023, revenues will be reduced to $ 165 billion, and in the second half of 2023, quarterly fall rates will be up to $ 50 billion, which is already a problematic level for the Russian economy. However, in the scenario of rigid sanctions, provided more oil discount on income is reduced to a record low-about $ 100 billion, which will become catastrophic 8-10% of GDP for Russia.

The introduction of restrictions should be combined with a powerful coercion to track the supply of Russian oil, as well as identify and impose sanctions on any company involved in the bypassing schemes. In order to counteract this, the sanction group proposes to create an independent monitoring group such as UANI, which tracks Iranian oil exports to control the Russian oil movement and identify any companies involved in bypassing sanctions.

Any termination of supply from Russia will harm many Russian oil fields, immediately put the Russian Federation in a shaky position in terms of its budget and payments, and will lead to the loss of an additional proportion of oil market. Thus, in 2023, with the basic sanction scenario with a limitation of oil price, Russia will have significant difficulties with financing its balance of payments and budget.