Russia political/pandemic update: life as an everlasting special operation

RUSSIA ECONOMICS - Report 05 Dec 2022 by Evgeny Gavrilenkov and Alexander Kudrin

Even though the COVID-19 pandemic no longer remains an issue in Russia, it still affects the country’s matters, albeit sometimes in a rather peculiar way, such as what happened recently in China and with the oil price. As the zero tolerance COVID policy in China and expectations of its weaker economic growth affected the global energy markets, oil prices fell. Brent slid below $90/bbl some time ago and has fluctuated around $85/bbl recently. Meanwhile, the five-day average Brent-Urals spread was close to $24-25/bbl. According to the Russian Ministry of Finance, the Urals blend average price in November was $66.47/bbl, implying that the recent $85/bbl Brent would mean around a $60/bbl Urals price. By an interesting coincidence, the Western countries finally agreed on the price cap for Russian oil to be set at exactly $60/bbl, i. e., close to the current level. If global economic problems persist, then the oil price can fall further, and if that happens, then the team of price-cap setters will be happy to reconsider its level in mid-January 2023. It will be interesting to see if these enthusiasts, formerly proponents of a free market, will be able to beat the latter and punish Russia more than the market does.

Although the Russian foreign minister recently confirmed that it wouldn’t be possible in principle for Russia and the West to return to the kind of relationship that might resemble that of the recent two or three decades, Russians seemingly have nothing against this. The popularity of the country’s leaders remains high despite the fact that the domestic consensus now assumes that the operation in Ukraine is going to be a long-lasting procedure (unless it evolves into something much bigger to please politicians worldwide). Still, maybe, the best characteristic of the chaotic thoughts that are preoccupying ordinary people could be given in a short phrase from a famous joke: “We used to live well. Now we live even better. And we want to live well again.”

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