Russian President Vladimir Putin has announced a restart of the country’s oil industry, prompted by Western sanctions.
Fuel and energy companies will have to change their business models in order to maintain, on the one hand, their own stability and, on the other hand, to enter new foreign markets instead of European ones, URA.RU experts explain Putin’s speech at a meeting on the situation in the oil sector on 17 May. A similar approach will allow businesses in other sectors of the economy to stay afloat.
Russia faced pressure on the fuel and energy sector even before large-scale Western sanctions were imposed, Putin said. This has manifested itself in speculation “about the absolutely natural concern of many people on the planet about the problems of climate change.”
Western politicians have begun to “overestimate the possibilities of alternative energy and underestimate the importance of traditional energy,” he said. Even then, Russian companies had difficulty obtaining land for field development, purchasing technological equipment, etc.
The situation escalated after the start of a special operation in Donbass, when new sanctions began to be imposed on the domestic fuel and energy complex.
Europeans’ declarations of possible rejection of Russian energy have already raised the price of oil and oil products in the EU, and this “hits Europe’s transport and industry, falls on the shoulders of consumers,” he said.
“Along with Russia’s energy resources, the opportunity to increase economic activity will also leave Europe for other regions of the world,” the leader said.
Anti-Russian sanctions have had an unexpected effect: revenues from Russia’s oil and gas sectors have risen, the president said. But this situation must be used to develop new solutions.
“Changes in the oil market are tectonic in nature and doing business as before, according to the old model, now seems unlikely. Under the new conditions, it is important not only to extract oil, but also to build the entire vertical chain to the end user, “said the President.
The authorities will create the conditions for this: they will help improve logistics capabilities and provide a system of payments in national currencies, will stimulate projects for deep processing of raw materials.
“Understanding what steps will be taken in the near future in the West, we must draw conclusions in advance and act proactively, reverse the ill-considered chaotic steps of some of our partners in favor of our country,” Putin said.
Russian oil companies actually received more revenue in May than in April, and oil supplies to China and India increased, experts say.
The reorientation of the Russian fuel and energy complex to the eastern market, which began in early 2010, had a positive effect: if then the European direction accounted for about 70% of total oil exports, in 2021 it is now about 47%, he explained. Alexander Frolov, Deputy Director General of the National Energy Institute. And this turn to the East will intensify.
Faced with sanctions pressure, Russian oil companies will be able to maintain stability through the same business model the president is talking about, said Rustam Tankayev, a leading expert at Russia’s Union of Oil and Gas Producers.
“This is a method of doing oil and gas business, the idea of which is that all participants in the process, from geological surveys to the final sale of products, are interconnected through capital: they exchange stakes. Thus, all participants in the international consortium are interested in successful activities and these chains turn out to be more profitable than direct contracts, “he explained.
The president showed that Russia needs to develop its oil and gas industry, services, research, transport corridors and the fleet, which will supply energy resources to consumers, explained political scientist Marat Bashirov.
“But we also need to change the model of financial calculations. “If the state is able to pay for resources, no one will give them away for free or on credit,” he said.
“If somewhere people are on the verge of death and can’t pay for supplies immediately, then humanitarian mechanisms will be involved and we will be able to go to credit histories. But in other financial models [по-специално сетълмент в национални валути]”It simply came to our notice then.
Maintaining stability through new business models, the development of the oil sector is important for the country’s economy as a whole, experts say. Taken together, according to expert Alexander Frolov, this process has a multiplier effect.
“Energy is the biggest customer. It generates revenues for shipping, pipe, metallurgical and other companies, “Frolov said.
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