Summary of the Russian Economy - February 2024

Jul 12, 2024

Mindmap

Lecture Notes on the Russian Economy - February 2024

Introduction

  • Presenter: Joe Blogs
  • Topic: State of the Russian Economy based on official data from the Ministry of Finance for February 2024
  • Context: Russia has restricted data release to the West.
    • Monthly official data releases still occur.
    • Data sourced from min. goo. ruen, document titled "Brief Monthly Information on Federal Budget Execution" (published on March 15, 2024).

Key Data Points Discussed

  1. Oil and Gas Revenues

    • Russia earned 1.6 trillion rubles (~$17.5 billion) in first two months of 2024.
    • Compared to 2.8 trillion rubles in the first two months of 2021, there's a 41% reduction.
    • Dollar equivalent drop is over 50% due to earlier exchange rates.
    • 2024 earnings higher than 2023 (950 billion rubles) due to increased oil prices.

  2. Oil Prices Impact

    • Euro's oil price has risen to ~$77 per barrel in early 2024, up from <$60 per barrel in early 2023. This boost is mostly due to OPEC+ production cuts, including Russia's cut of 471,000 barrels/day.

  3. Non-Oil and Gas Revenues

    • Significant increase in first two months of 2024, totaling 3.4 trillion rubles.
    • More than double oil and gas revenue.
    • Russia now earns 2/3 of income from non-oil and gas revenue (opposite of pre-Ukraine war period).
    • Reason: Russia's transition to a war economy—companies producing wartime necessities.

  4. Total Revenue and Transition to War Economy

    • First two months of 2024: best revenue out of last four years, exceeding 5 trillion rubles.
    • Transition shown in revenue lines: Russia's dependency shift from oil and gas to wartime revenue.
    • 2021 (Gray line): Highest revenue from oil and gas pre-war.
    • 2022 (Orange line): Revenue similar to 2021 initially but declined as war impacted volumes and prices.
    • 2023 (Blue line): Transitional year, revenues improved due to war economy.
    • 2024 (Yellow line): Highest revenue due to war economy funding.
    • Long-term Sustainability Issues: War economy not a viable long-term economic strategy.

  5. Total Expenditure

    • Highest in four years for first two months of 2024: 6.5 trillion rubles.
    • Expenditure driven by war in Ukraine (30% of central budget).
    • Comparing with 2021: Expenditure has nearly doubled.
    • Expenditure does not foster long-term economic growth.

  6. Profit and Loss Analysis

    • 2021: Profit in every month, total profit 9.6 trillion rubles.
    • 2022: Transitioned to losses mid-year, ending with 3.3 trillion rubles loss.
    • 2023: Continued losses initially, shifted slightly to profit in the latter half but ended with a 3.3 trillion rubles loss.
    • 2024: Posting losses in both January and February, cumulative net loss $16 billion.

Summary and Conclusions

  • Oil and Gas Revenues: Continues to fall; major decline in volume despite higher prices.
  • Shift to War Economy: Revenue from non-oil sectors booming due to government contracts for wartime production. Presents an unsustainable bubble.
  • Expenditure: Reaches all-time high, directed toward war efforts, not yielding long-term economic benefits.
  • Overall Financial Health: Short-term revenue growth due to wartime spending; however, long-term prospects are bleak due to unsustainable model and mounting losses.

Acknowledgements

  • Thanks to supporters on various platforms (Patreon, YouTube Membership, etc).

Summary: The Russian economy in early 2024 shows short-term financial boosts due to war-driven production. However, the sustainability and true health of the economy remain in jeopardy. The increased expenditure without long-term economic investments could lead to financial instability.