Russia's losses from sanctions and cheap oil calculated

Russia's losses from sanctions and cheap oil calculated

Russia's losses will reach about $600 billion due to the financial sanctions and the sharp drop in oil prices over the period from 2014 to 2017, analysts of the Economic Expert Group, Yevsei Gurvich and Ilya Prilepsky concluded.

The losses from the sanctions will amount to about $170 billion, lost revenue from oil and gas exports will amount to another $400 billion. Capital losses have been calculated at the price of oil at $50 a barrel, while export revenues — at the same price as compared with the rate of $100 per barrel, Vedomosti reports.

The analysts have estimated the reduction in gross capital inflows at $280 billion over 3.5 years, of which $85 billion is direct investment. The reduction of foreign direct investment with lower possibility of loans and capital inflows into the market of public debt will increase the effect of the financial sanctions about three-fold.

Yevsey Gurvich and Ilya Prilepsky indicate that sanctions' impact on capital inflows is not dependent on oil prices, but the reduction in oil prices reinforces them. If oil prices were high, capital losses due to sanctions would have amounted to approximately $160 billion (1.9% of GDP), low oil prices cause bigger losses – about $170 billion (2.8% of GDP).

The professor of the RANEPA faculty of Finance, Money Circulation and Credit, Yuri Yudenkov, said in an interview with a correspondent of Vestnik Kavkaza that the anti-Russian sanctions had the worst repercussions in two directions. "Firstly, they hit politicians, since their activities are limited. On the other hand, Western countries tried to limit activities of our state as a whole."

"The first blow of sanctions against the economy was received by the high-tech sectors, which use imported technology and materials. I mean modern engineering: the machine-tool industry, semiconductors, computers. I would also like to mention science, which was restricted at least psychologically: contacts with American scientists, which used to be more or less free, declined," the expert pointed out.

At the same time, according to Yuri Yudenkov, the domestic agriculture and processing of agricultural products benefited from sanctions.

But low oil prices "hit all of us, from the budget to every citizen." "I cannot think of anyone for whom the drop in oil prices would not have played a significant role. All commodity prices are converted into the price of oil, even gas and mineral fertilizers. That's why the fall in oil prices has caused a decrease in prices for the whole group of our export goods, and then a chain started," the professor of the RANEPA faculty of Finance, Money Circulation and Credit stressed.

The leading analyst of National Energy Security, Igor Yushkov, drew attention to the long-term impact of the anti-Russian sanctions. "There were no challenges in the mining industry in the short term, because we hadn't planned to realize any projects until 2017. After the introduction of sanctions, Rosneft and ExxonMobil closed the Pobeda field in the Kara Sea," he gave an example.

The same thing applies to Gazprom. Gazprom also did not run any new Arctic projects due to the fall in oil prices. For example, the launch of the Dolginskoye field in the Barents Sea was postponed. Gazprom's only project, which suffered from sanctions against Russian oil and gas, is the Yuzhno-Kirinskoye field at Sakhalin," Igor Yushkov said.

The expert agreed with Yudenkov that oil prices hit the Russian economy strongly. "All Russian companies have revised their investment programs because of it. Rosneft has suffered the most, because it took out many loans before the crisis. Due to the sanctions Rosneft had to borrow money from Asia, which is more expensive. The investment programs of all the other companies were also cut," the leading analyst of National Energy Security concluded.

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