hi welcome back to Joe blogs in today's episode I want to talk to you about what's happening in the Russian economy and to look at the official data that's been released by the Ministry of Finance in Russia for February 2024 now if you follow the channel you'll know that Russia has severely limited the amount of data that it's prepared to release to the West because it believes that that's a security risk telling people actually what's going on in the economy basically Russia doesn't want anybody to know if the sanctions are actually affecting what's happening on the ground but fortunately once a month Russia does actually release official data giving us some information although they have actually limited what they're publishing within that data but we've still got some details so in today's video we will go through the official figures that have been provided by Russia so don't bother sending me any comments saying you're making all of this up you're talking nonsense because these are the official figures and you can check them out yourself if you go to min. goo. ruen if you want to read it in English SL doent and scroll down to the documents entitled brief monthly information on federal budget execution that was published on the 15th of March 2024 you can get all of the details in there but rather than just running through a table of data which can get a bit boring I've transposed all of these figures into a spreadsheet and created some colorful graphs because everybody likes a graph and I also find it much much easier using graphs when you're comparing different years because you can see exactly Which is higher and which is lower so in today's video we'll go through the latest published results in terms of the oil and gas revenues and these figures are really interesting because what we are seeing is that Russia is moving away from being entirely dependent on oil and gas towards non oil and gas revenue and you might be thinking what is non- oil and gas Revenue but we'll go through that in some detail and talk about the fact that Russ Ria has now become a war economy we'll then have a look at what's happening with total revenue which is basically an amalgamation of non- oiling gas and oil and gas Revenue we'll have a look at what's happening with expenditure because that's one of the key issues that is coming out from this document Russia is continuing to ramp up its expenditure particularly on what's happening in Ukraine obviously and as a result of that it's causing the economy to post huge losses so we'll go through the bottom line as to what happened in February and then finally today I'll wrap up with my summary so what I think's going on in the Russian economy right now what's likely to happen over the next 3 to 6 months but before we get started on all of that I'd like to say thank you so much to everybody that's supporting the channel if you've bought me a coffee or sent me a YouTube super thanks thank you for the time and effort you've taken to do that I genuinely appreciate every single one of those I don't have time to respond to every one of them individually but I genuinely appreciate it and if you're supporting the channel on a longer term basis either through patreon or buy me a coffee membership or YouTube membership thank you for that support it really helps to keep me going it keeps me motivated and makes me think up more videos so I post on a regular basis so thank you for that this chart shows the cumulative movement in Russia's oil and gas revenues for 2021 2022 2023 and the first two months of 2024 and the color coding we've got here the gray line at the top represents 20 21 and the reason that that's important is that it was the last year that was completely unaffected by the war in Ukraine the orange line is the revenue for 2022 which is the first year of the war the blue line is the revenue for 2023 and the small yellow line on the left hand side of the chart which is actually quite difficult to see because it's very close to the Orange Line represents the first two months of 2024 what this shows is that in the first two months of 2024 Russia has earned 1.6 trillion rubles which at the current exchange rate is around $17.5 billion and when you compare that figure to the first two months of 2021 when Russia earned 2.8 trillion rubles which at that time equated to around 367 billion us because the exchange rate back in 21 was running at around $75 to1 us Russia has seen a fall of 41% in its oil and gas revenues compared with the period before the war started but in terms of the US dollar equivalent amount it's more than 50% now one thing that is interesting to note about the first 2 months of 2024 is that Russia has earned significantly more than it earned in the first two months of 2023 the current year earnings of 1.6 trillion rues Compares with 950 billion rubles for the first two months last year and the main driver for that is the increase in oil prices that's been seen at the start of 2024 if we look at this chart which shows the price of Euro's oil which is Russia's main blend you can see that over the last couple of months there's been a significant increase in the price of Euro's oil and it's currently trading at around $77 and that compares to the first two months of 2023 when Russia was selling its oil for less than $60 per barrel so the total income for Russia has increased however this has been driven predominantly as a result of the increase in the price of oil per barrel which in itself is being driven by the production cuts that OPEC Plus have announced including Russia's second voluntary cut of 471 th000 barrels per day now if you follow the channel you'll be fully aware that the USA is currently laser focused on heightening the sanctions applying to Russian oil and trying to stop all trades being done that are priced above the cap of $60 per barrel and if the USA is successful in that we will see a reduction in the amount of Revenue that Russia is earning because the price will come back down this chart shows the movement in Russian non- oil and gas Revenue over the last four years and we got the same color coordination here however the lines are entirely reversed from the chart that we just looked at for oil and gas 2021 is shown by the gry line and is the year where Russia earned the least from non- oil and gas Revenue 2022 is the orange line which is ranked third on this graph 2023 is shown by the blue line and the first two months of 2024 are shown by the yellow line and as you can see in the first two months of this year Russia has earned significantly more than it earned in any of the previous years from non oil and gas revenue and interestingly the total figure of 3.4 trillion rubles is more than double the 1.6 trillion rubles that Russia earned from oil and gas so basically what we have here now is a situation where Russia is earning 2third of its income from non oil and gas revenue and prior to the invasion of Ukraine we had the exact opposite Russia was earning the vast majority of its income from oil and gas and the remainder of income was relatively small and if we look at the direct comparison between 2024 and 2021 which was the last full year completely unaffected by the war you can see that non oil and gas revenue is more than three times higher so there has been an explosion in non- oil and gas revenue and if you follow the channel I'm sure you'll be aware that the reason for this huge increase is the fact that Russia has now converted itself into a wartime economy so a lot of companies within Russia are now being asked to make things that are needed in Ukraine so the Russian state is funding all of these purchases they're pouring billions of dollars into creating weaponry and equipment and vehicles and lots of other things that are needed to keep the war going and as a result of that a lot of these companies are seeing a huge increase in their turnover which is being paid for by the Russian state but when you think about the situation what we're seeing here is a short-term bubble starting to form as a result of Russia pumping billions of dollars into the war and if the war came to an end tomorrow all of that would stop overnight and we would see a complete collapse in this non- oil and gas Revenue so these figures are being highly inflated by the fact that the Russian state is sponsoring all of this Revenue this chart shows the move movement in Russia's total revenue which is basically the amalgamation of oil and gas revenue and non-oil and gas revenue and what this shows is that the first two months of 2024 represent the best year that Russia has had out of any of the last four total revenue in the first two months equated to more than 5 trillion rubles which is an increase of more than 32% against the same figure for 2021 I think what's interesting about this chart is you can actually see the the transition that Russia has made over the last 3 years from being dependent on oil and gas Revenue to now being dependent on wartime Revenue if you look at the gray line which represents 2021 you can see all the way through to the end of that it was at the highest level the orange line which represents 2022 which was the first year of the war you can see that in the first five months of 2022 total income was around the same level as in 2021 and this was as a result of the fact that oil prices biked so even though Russia's volumes fell their total revenue stayed around the same because they were earning more per barrel however as the sanctions started to kick in and Russia had to offer discounts and also saw a large fall in its volumes the total revenue figure fell in 2022 and you can see there was a clear Divergence between the 2021 figures and 22 figures towards the end of the year now 2023 which is shown by the blue line was the transitional year you can see that in the first months of the year total revenue was less than it was in 2022 and 2021 however towards the end of the year you can see that the Blue Line actually crosses over the orange line which shows that total revenue in 2023 was actually more than it was in 2022 and this was the point when Russia started pouring lots of money into the wartime economy sponsoring lots of firms to help with the war effort and in 2024 which is shown by the yellow line for the first two months you can see that total revenue is now at the highest out of any of these years and this is all being driven by what's happening in Ukraine and as we've talked about before the problem with that from Russia's point of view is that it doesn't have longevity this isn't something you want to build your economy on for the long term you don't want to constantly be in a wartime situation because you're not actually producing things that consumers want to buy and growing your overall profitability all you're doing is taking money from the state and investing it into things that you need to keep the war going and as soon as that war stops all of that Revenue will also stop this chart shows Russia's total expenditure for the last four years and what we've got here is a very simple situation 2021 was the year when Russia's expenditure was the lowest followed by 2022 followed by 2023 and in the first two months of 2024 Russia's total expenditure is the highest it's been at any point in the last four years and this of course is being driven predominantly by the war in Ukraine Russia is now spending more than 30% of all of its Central Budget on the war in Ukraine and that expenditure continues to increase and in the first two months of 2024 the total expenditure was 6.5 trillion rubles which is virtually double the figure from 2021 and the problem from Russia's point of view is that all of this increase is not helping to grow the economy in the long term this money isn't being invested into things like jobs and new initiatives and new technology it's going in to fund all of the machinery and the weapons and everything else that's needed in Ukraine and obviously from a returns point of view that's not going to yield anything for the long-term future of the Russian economy and this graph shows the bottom line for the Russian economy is Russia making a profit or is it incurring a loss and what this graph clearly shows is the story of the war so far in 2021 Russia posted a profit in every single month and the total full year profit was 9.6 trillion rubles in 2022 which was the year when the war started in February Russia posted a monthly profit in the first five months however in the second half of the year it started to post losses and by the end of the year the full year figure was a loss of 3.3 trillion rubles which compared to 2021 represented a negative turnaround of almost 13 trillion rubles in 2023 the situation continued to get worse and in the first five months of the year Russia posted month-on-month losses however in the second half of 20123 as Russia started converting itself into a wartime economy it started recovering some of those losses and by the year end it posted a similar figure to 2022 a loss of 3.3 trillion rubles and I think what's really interesting about this chart is that in the first 2 months of 2024 Russia has posted losses in both months and this is predominantly as a result of the fact that expenditure is now outstripping the positive impact that the switch to the wartime economy is having so Russia is pumping billions of dollars tens of billions of dollars into all of its companies to keep producing things for the war but unfortunately it's also spending an absolute fortune and the bottom line is that Russia is continuing to post losses and the more losses it posts means that it has to keep dipping into its reserves and if this situation continues then at some point those reserves will run out so what's the summary and conclusion today well I wanted to post this video because I think the figures that have been posted by the Ministry of Finance from Russia for February 24 are absolutely fascinating because they show the continuation of this trend that we're seeing of falling oil and gas revenues being offset by War economy revenues where Russia is basically putting a fortune into creating equipment that it's sending to Ukraine as we saw from the data total oil and gas revenue is down 41% compared to what Russia earned in 2021 which was the last full year that was unaffected by the war in Ukraine and when you consider the oil prices right now are considerably higher than they were back in 201 21 what that tells us is that there's been a huge fall in the volume of oil that Russia is selling and we've talked about this a lot on the channel over the last 12 months Russia has announced two major cutbacks in its production the first was in April 2023 when it announced it was going to cut back 500,000 barrels and at that time Russia said that it was because it was joining OPEC in reducing the global Supply but it also followed up that announcement with a recent announcement that it's going to cut back a further 471 th000 barrels so over the last 12 months Russia has voluntarily said that it's going to cut back on a million barrels of oil production per day and obviously that is a huge amount of oil and that equates to a massive fall in revenue and there are obviously major question marks over what Russia's actual motivation for these production cutbacks has been is it because they want to support OPEC Plus or is it because they're having production problem as a result of the loss of Technology the loss of the partners and also the attacks that have been taking place by Ukrainian drones but what we've seen in the data from today's video is that there has been a significant fall in volume which is now translating into a fall in revenue and even though Russia is making more money than it was this time last year it's still significantly less than it was making before the war started so given the fact that oil and gas revenue is down so significantly you would have expected total revenue for the Russian economy to be down by an equivalent amount because historically Russia has been dependent on oil and gas however what we've seen from today's data is the official figures show that total revenue is up more than 30% against where Russia was in 2021 and that seems really bizarre but the reason for that is that Russia has now pivoted and become a wartime economy so a lot of companies in Russia are now being told to produce things that are being sent over to Ukraine so this is equipment and vehicles and weapons and everything that Russia needs to keep its War Machine moving and the state is sponsoring all of that Revenue it's paying all of those companies directly to produce all of those things and send them over to Ukraine so what we have got is a bubble that's forming in terms of the Russian economy the state is pumping money into all of these different Industries they're having a Heyday they're making a lot more Revenue than they were making historically and so it looks great on paper all of this gives you a good set of results and that's what we've seen today total revenue is up but when you take a step back and think about what's happening with that total revenue what Russia is doing is reducing the amount of Revenue it's earning from sustainable sources so it's got huge amounts of oil and gas that it can sell over the next 50 to 100 years so obviously that Revenue can carry on for the long term so to reduce this amount of money it's earning from those sources and at the same time it's increasing the amount of money that it's earning from self-funded sources so basically the government paying these companies to produce lots more revenue and that is not sustainable because firstly if the war in Ukraine finished tomorrow Russia wouldn't need to continue doing that so Russia would see all of that income disappear overnight and secondly those companies are now focusing on producing things that are going to Ukraine if the war stopped and no demand for any of those things there is a potential that all of these companies would then be vulnerable because they'd no longer be producing all of the things that they are producing before the war started and so it may take time to be able to go back to doing all of that and actually earning real revenue from selling real products so the total revenue figure is a little bit misleading it does look good on paper but this is why you have to dig down into the detail and look at the analysis as to what's driving that increase in Revenue and whether or not it's sustainable and good for the economy of Russia in the long term and I think what we're seeing is that this is a short-term gain for long-term pain from Russia's point of view now in terms of the expenditure figures what we've seen in today's video is expenditure is now at an all-time high the figures for 2024 are double the figure for 2021 and the huge increase is obviously coming from the war in Ukraine the war effort is soaking up a huge amount of cash and unfortunately from Russia's point of view there is no end in sight so it's likely as we go forward that there will be even further money invested into the war and as we've talked about before this investment isn't really an investment Russia isn't going to get a long-term yield this isn't going to grow in value and start to improve the GDP of Russia all it's doing is trying to win over the territory in Ukraine so this is really dead money it's going into the war it's not going to help the economy in the long ter term and in terms of the bottom line for the first 2 months of 2024 Russia has posted a net loss in both January and February and the cumulative net loss so far of around $16 billion compares to profits that were made in 2021 and 2022 now the 16 billion is actually slightly better than where Russia was this time last year but the main driver for that is the fact that Russia is now this wartime economy so it's pumping huge amounts of money into of these Russian companies to produce things for the war in Ukraine which is having a short-term uplift in terms of the bottom line however as we've just discussed that's not really a sustainable business model for the long-term future of the Russian economy so the overall summary of today's video is that what we've seen from the first two months of 2024 is that oil and gas revenue is continuing to fall Russia is still experiencing a huge fall in the value of all of its sales compared to where it was before the war War started Russia has started to offset that loss of income with other income that it's now generating because of the war effort in Ukraine which is making the figures look better however this additional income is dependent on the war in Ukraine and the long-term prospects for the Russian economy are currently getting worse so hopefully you've enjoyed today's video you found it useful informative and thought-provoking if you've liked what I've said then please give me a thumbs up thank you for watching this video all the way through to the end and here's something to about a smile on your face foree spee spee speee for