• Rerouted Oil to Soften Russian Economy Contraction: World Bank

    Oil shipment volumes from Russia “have not changed materially” despite war sanctions, and the absorption of its losses in Europe by the likes of China and India would help keep its economic contraction at 0.2 percent this year from an estimated 2.1 percent in 2022, the World Bank said Tuesday.

    “Clear signs of trade diversion emerged following the invasion, with the value of Russian fuel exports to the EU declining by over 40 percent last year, while exports to India and China increased”, the United Nations lender said in its outlook report for 2023 and 2024.

    Traditionally the top destination for Russian energy, the European Union accounted for eight percent of Russia’s mineral fuels exports in December 2022, having consistently fallen since March 2022, when the region comprised 17.4 percent of the total. Europe’s intake March 2022, the month after President Vladimir Putin launched his war on Ukraine, was its highest in the January 2019-March 2023 data the World Bank presented in the report. The 27-member bloc’s share of imports of Russian mineral fuels stood at 2.2 percent March 2023.

    In contrast world number two economy China saw its share of imports of Russian mineral fuels rise to 8.2 percent in March this year from six percent in March 2022 and 5.8 percent in December 2021. India saw a sharper increase, accounting for five percent of Russian mineral fuels shipments March 2023 from 0.9 percent March 2022 and 0.6 percent December 2021.

    “Russian imports from Türkiye more than doubled”, the World Bank said. Türkiye’s share stood at 1.4 percent March 2023 from 0.7 percent March 2022 and 0.5 percent December 2021.

    “Those trends were also reinforced since the beginning of the year, with Russia’s fuel exports to the EU falling by 87 percent in March from a year earlier”, the Washington-based World Bank added.

    “In Russia, the contraction this year is envisaged to be milder than initially forecast, partially due to the continued flow of energy exports”, it said.

    “Output in Russia is projected to contract slightly, by 0.2 percent in 2023, a 3.1 percentage point upgrade from the January 2023 forecast. This change mainly reflects the unexpected resilience of oil production and higher-than-expected growth momentum from 2022”, the report stated.

    Russia’s rerouting of its oil helped limit its output contraction last year to 2.1 percent. “The recession was less severe than projected earlier, due to higher oil production, the redirection of oil exports away from traditional markets, and more government fiscal support than initially assumed”, the World Bank said.

    But while Russia’s fuel exports found alternative markets, the World Bank said, “Continued contraction in export volumes, weak domestic demand, policy uncertainty, and sanctions due to Russia’s invasion of Ukraine will continue to weigh on activity”.

    Slowdown in Other Oil Economies

    Other oil exporting economies are also likely to slow down this year “as the boom in industrial activity associated with high energy prices fades”, the report stated.

    “Crude oil prices are projected to average $80/bbl [barrel] in 2023, a $8/bbl downward revision from the January forecast, and to edge up to $82/bbl in 2024, reflecting a modest pickup in demand”, the World Bank said. “Prices for natural gas and coal are expected to moderate in 2023 and decline further in 2024, as Europe has made substantial progress in improving efficiency and reducing energy demand. Natural gas prices in Europe are expected to remain well above their pre-pandemic five-year average, despite elevated inventories”.

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