The main sanctions that should kill the Russian economy are yet to come – Zelenskyy’s advisor
The key sanctions against Russia, which should kill its economy and prevent it from financing the war against Ukraine, are yet to come.
Oleg Ustenko, an economist and economic advisor to the president of Ukraine, said this in an interview. According to him, we are talking about energy sanctions – against Russian oil and gas.
Such restrictive measures can sharply reduce all revenues to the state budget of Russia.
– I think the main sanctions are still ahead. And this significant primary sanction is the oil sanction. The second major significant sanction that will be applied is the sanction on Russian gas. At one time, Russia was trying to use the energy resource as a weapon completely, and now that weapon is firing in their direction. They clearly understand that, so they’re freaking out about it. In my opinion, this will be the primary sanction, which should kill the Russian economy and not allow them to earn money for the war, – Ustenko said.
He reminded that the sixth package of the EU sanctions against Russia includes a partial oil embargo, which will take effect by the end of this year. According to Ustenko, when this sanction comes into effect, the Russian budget will potentially lose about 40% of its revenues.
– With them already cut off from foreign capital markets, they will only be able to finance this new deficit from the printing press. This means that they will quickly accelerate galloping inflation and then move into so-called hyperinflation, – said the president’s advisor.
Commenting on the growth of Russian revenues from energy resources, despite the reduction in sales volumes, Ustenko explained that the reason is their rise in price on the world market. At the same time, he reminded us that the world’s countries are working out a price mechanism that will limit the cost of Russian oil.
– The task is to minimize the income of the Russian Federation just from oil, – said Ustenko.
The economist said that there are two possible ways:
1. First (profitable for the world and for Ukraine) is that the price will be limited by the production cost of oil in Russia. It is approximately $10 per barrel. That is, this is the amount Russia will be able to receive when selling its oil on the world market. And the difference between the market price and $10 can be reimbursed into a special fund for the financial needs of Ukraine.
– That is, if now the market price is about $100 per barrel, $10 will go back to Russia, $90 per barrel of oil will be reimbursed to this fund, – specified Ustenko.
2. The second option suggests only limiting the price of Russian oil (price cap) to $10 per barrel.
And to prevent Russia from circumventing the price cap, the international community is planning to introduce a fuse: no insurance or other services will be provided to tankers that will carry Russian oil in violation.
Ustenko confirmed that Russia is now trying to prevent energy sanctions, in particular by reducing gas supplies to Europe and creating a food crisis. At the same time, the economist believes that Moscow is unlikely to achieve any success for itself in this situation.
