Russia’s supply of cheap oil is running out, another major blow for Vladimir Putin as he continues to grapple with a growing economic crisis. Businesses and consumers across the country are reeling under the effects of spiralling inflation and high interest rates.
In April, the Central Bank confirmed it would keep the key interest rate at 21% for the foreseeable future, much to the bitter disappointment of the Kremlin and business leaders. Many firms are fighting to stay afloat, as they attempt to pay back bank loans originally secured during more favourable economic times.
Sergey Chemezov, the head of Russia’s defence conglomerate Rostec and a former KGB colleague of Putin, warned that many companies could go bust.
And the news on the economic front appears to be getting worse for the beleaguered Kremlin boss.
Gazprom Neft CEO Alexander Dyukov said Russian energy companies were increasingly being forced to tap into so-called “hard-to-recover” oil reserves to maintain current production rates.
These are deep, complex, and geologically intractable deposits that require expensive extraction methods, advanced technology, and massive government support.
At Gazprom Neft alone, more than 60% of oil production already comes from these high-cost sources.
By 2030, more than half of the new oil production across Russia is expected to come from similar sites.
Dyukov’s warning comes as new financial data shows energy revenues have dramatically plunged over the past 12 months. Income from oil and gas sales fell by an eye-watering 1.09 trillion roubles (£10 billion) in April.
This represents a fall of 12% year-on-year, and presents the Kremlin with an unwanted fiscal headache. Meanwhile, the Kremlin has stopped paying pensions to Russian pensioners living in the Baltic States.
Some 4,000 Russians in Estonia have not received any money from the Kremlin since February.
Signe Riisalo, chair of the Riigikogu Social Affairs Committee, said the average pension payment from Russia amounts to €200. The smallest payments are just under €15, while the largest reach €2,800.
Ksenia Repson-Deforge, a spokesperson for the Social Insurance Board, said: “This isn’t just a problem for Estonia.
“The same situation applies in Latvia, Lithuania and other countries where residents are entitled to a Russian pension.”