As the West imposed sanctions on Russiaincluding the $60 per barrel oil price cap, the country has reportedly lost more than half the physical volume of its past gas sales to Europe amid the Ukraine war, while gas prices on the continent are now back to pre-February levels.

This could result in Russia losing $50 billion in annual business in 2023, a statement said Timothy AshAssociate Fellow at Chatham house, released on the CEPA website.

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Ash pointed out that if the Urals continue to trade at a 30-40% discount to Brent, even if Brent were to trade in the mid-1970s, it could save Russia another $100 billion in oil export earnings. “Potentially that would result in a total loss of $150 billion this year,” he said.

Lower energy export earnings will also slow Russia’s broader real GDP growth, which will result in a double whammy on the fiscal side as tax revenues also fall, he argues.

Ash also pointed this out That of Russian President Vladimir Putin believes Europe will back down on its energy tactics, he got five things wrong.

1. Higher prices led to a remarkable response to demand. German gas consumption has fallen by around 25%, he says.

2. So far the winter in Western Europe has been relatively mild, but ironically it turns out to be harsh in Russia itself.

3. Western solidarity was strong and Europe managed to get alternative energy sources.

4. Despite much debate among Western allies, an agreement was finally reached on the $60 oil price ceiling.

5. The war in Ukraine negatively affected global growth and demand for goodsespecially oil and energy are affected.

Ash says a collapse in global demand will amplify volume losses for Russia with a price effect. “The overall outcome will be a damaging blow to Russia’s macro-stability and will accelerate Russia’s longer-term economic malaise and decline,” he wrote.

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