Putin facing 'catastrophe' as oil prices plummet - 'Russia gets less cash to fight its war'

Russia could be forced into imposing austerity measures this year as the West’s price cap on Russian crude oil threatens to wreak havoc on Vladimir Putin’s finances.

Russian profits could be greatly diminished as the prices of the ‘Urals’ benchmark grade of crude oil exported from the country continues to fall steadily since the cap came into effect on December 5.

At the current level, production can continue at a level much closer to extraction costs.

Robin Brooks, chief economist of the lobby group IIF, said: “The price on Urals crude is down sharply versus Brent since the start of the G7 cap.

“That’s good, as Putin gets less cash to fight this war.”

The price of Russia’s ‘Urals’ plummeted in December, falling to an average of just $50.47 per barrel in the first month of the cap, down nearly a third from the comparable period a year earlier.

The country’s finance ministry said last week that the average price for Russia’s ‘Urals’ benchmark grade was $76.09 per barrel.

Many believe the $40 threshold is Russia’s production cost, but Urals crude recently traded at $38.

Cetrocredit bank economist Yevgeny Suvorov told the Moscow Times: “The Ministry of Finance confirmed that everything with regard to Urals prices is not just bad, but very bad.

“$40 per barrel can be a real catastrophe for the budget and economy... If it becomes clear that $45–$50 is a new normal, the finance ministry will have to switch to an austerity regime this year.”