Russia’s status as a global oil superpower is rapidly fading, according to Kyrylo Shevchenko, former chief of the National Bank of Ukraine. The country, for decades a dominant force in the global energy market, is now facing a future of stagnation and decline in its oil sector claimed the influential economist.
Posting on X, he said: “Russia’s status as a global oil power is eroding,” highlighting a bleak outlook for the country’s energy future. “Oil output is expected to grow by just 1.7% by 2050 — from 531 million tonnes in 2023 to 540 million tonnes.” With high-grade reserves depleting and demand set to fall after 2035, Russia’s position as a leading oil exporter is in serious jeopardy.
Mr Shevchenko emphasised that the country’s economy, heavily dependent on energy exports, is in for a turbulent period especially given Vladimir Putin’s ongoing war on Ukraine.
Oil and gas revenues account for nearly 40% of Russia’s federal budget, making the country highly vulnerable to the shifting dynamics of the global energy market.
He added: “With demand expected to fall post-2035 and high-grade reserves drying up, Russia’s status as a global oil power is eroding — alongside a key source of budget revenue.”
The economic impact is already being felt in Russia’s everyday life, with skyrocketing food prices placing a strain on household finances.
The war has intensified these pressures, leading to rising supermarket costs. Staple goods have seen eye-watering price increases in recent months. For instance, the cost of butter has surged by over 30%, while potatoes — a basic foodstuff — have become nearly 73% more expensive in just one year. Other essential items like bread, milk, and eggs have also soared, with inflation outpacing many people’s wages.
Mr Shevchenko’s analysis also sheds light on Russia’s energy strategy pivot towards natural gas, but this too faces significant challenges. He said: “The Kremlin is doubling down on natural gas, projecting a jump from 637 bcm in 2023 to over 1.1 trillion by 2050 — mostly through LNG.”
However, he predicted that this ambitious shift was unlikely to succeed without overcoming substantial obstacles, particularly Western sanctions that have hampered the development of LNG projects. One key project, Arctic LNG-2, has been “paralysed,” unable to ship or market cargo due to the restrictions.
Despite such challenges, Russia has remained committed to its energy ambitions, aiming to increase pipeline exports by 2036. However, Mr Shevchenko pointed out that even these efforts will not return the country to pre-war export levels, making it clear that “high risk, low reward” characterises the Kremlin’s energy future.
The ramifications of this energy decline are not just economic but geopolitical. As oil revenues — once a pillar of Russia’s global influence — continue to shrink, the country faces an uncertain future.
As the war in Ukraine drags on and sanctions continue to isolate Russia from the West, the nation’s energy sector appears to be on a downward trajectory.
The combined effects of dwindling oil reserves, stagnating production, and the challenges in expanding gas exports point to a turbulent future for the Russian economy, where the loss of its oil superpower status may prove to be just the beginning.