11 Jan 2023 16:30

Putin instructs Deputy PM Novak to draw up proposals to curb impact of Russia's oil discount on budget

MOSCOW. Jan 11 (Interfax) - Deputy Prime Minister Alexander Novak said at a meeting of Russian President Vladimir Putin and the Russian government that the main problem in the oil issue now is the high discount on Russian oil prices to the Brent benchmark price.

The high discount is observed due to the high costs of tankers' freight, he said. The deputy prime minister said he hopes that the situation would be rather temporary.

"As far as oil is concerned, the main problem is high discount as a result of high levels of freight costs. That is, the cost of freight has risen quite dramatically due to the risks that carriers and counterparties face, regarding possible sanctions, because they do not set a price cap. But I hope this situation will be temporary. The discount should diminish over time, as we have observed it throughout 2022, when in March and April, the discount increased greatly, then it began to fall gradually and halved," the Russian deputy prime minister said.

Novak noted that the price cap on Russian oil products comes into force on February 5, but the European Union has not yet set the level of maximum prices, considering, in particular, the methodology of differentiation by type of oil products.

"So now the main risk is, in my opinion, the discount. The second one is the embargo on the supply of oil products and the price cap, which are being introduced. We will respond to these challenges, we will report, we will take all necessary measures to ensure supplies to new markets, logistics, as well as appropriate shipping," he said.

In this regard, Putin ordered that proposals to curb the impact of the discount on Russian oil on the budget should be drafted.

"We need to look at this discount so that it does not create any problems with the budget. Discuss it, and then please report your proposals to me separately," the Russian president said.