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Before mid-March, Russia had always been a “top student” in the prevention and control of the new crown pneumonia epidemic. Since then, the Russian epidemic has changed, and the number of new confirmed cases has exceeded 5,000. According to the prediction of Russian infectious disease experts, Russia will usher in a “difficult time” in the next few weeks.
According to Russian media reports on the 22nd, Russia has added 5,236 new confirmed cases of new coronary pneumonia in the past 24 hours, with a total of 57,999 confirmed cases; 57 new cases of new coronary pneumonia, and a total of 513 deaths. So far, Russia has performed 2.25 million new coronavirus nucleic acid tests, and 145,000 patients nationwide are in medical isolation.
Nevertheless, Li Yonghui, a researcher at the Russian Institute of Eastern Europe and Central Asia of the Chinese Academy of Social Sciences, pointed out to the 21st Century Business Herald that the death rate of new crown patients in Russia is only 0.85%, and the infection rate is only 0.7%, and the current anti-epidemic measures have been very strict, so In general, it is still preventable and controllable.
“The impact of the original epidemic has brought Russia’s social and economic activities to a halt, and the plunge in oil prices has made the entire economy worse. Not only has the revenue of crude oil imports plummeted, but it has also caused a sharp depreciation of the ruble and increased the import cost of medical supplies.”
“Although Russia has made a lot of preparations before the peak of the epidemic, and claims to have foreign exchange reserves of up to 580 billion U.S. dollars, under the dual crisis of the epidemic and oil prices, this year will definitely be a very difficult year for Russia.” Li Yonghui believes that despite a one-month stalemate, OPEC+ finally reached a record 9.7 million barrels per day production reduction agreement, but it is actually too late, and the crude oil price war has already had an impact on Russia.
The International Monetary Fund (IMF) recently released a new issue of the World Economic Outlook Report, predicting that the Russian economy will shrink by 5.5% in 2020, and the unemployment rate will increase from 4.6% in 2019 to 4.9%. According to a survey of 19 Russian economists by the Development Center of the Russian Higher School of Economics, the Russian economy is expected to shrink by about 2% this year.
Postpone the peak period strategy
Russian President Vladimir Putin expressed cautious optimism on the outcome of the fight against the epidemic at an expert meeting on epidemic prevention situations on the 20th. “The conclusion confirms that we have generally completed the first phase of the anti-epidemic task, which is to slow down the spread of the epidemic. The non-working day epidemic prevention measures announced previously, the self-isolation regulations, and other decisions have allowed us a certain amount of time to slow down the virus. Speed of propagation.”
Li Yonghui pointed out that Russia is adopting a strategy of delaying the arrival of the peak period, gaining time for the medical system to prepare. “I think from this point of view, Russia’s anti-epidemic action has achieved its goal, and it may reach the peak of the epidemic in the next two weeks. Their current anti-epidemic measures are already very strict.”
At present, Russia is increasing the pace of domestic production of anti-epidemic materials. Putin said that the daily output of masks in Russia was only 1.2 million in early March, and it will reach 3.5 million by the end of April, and it is expected to reach 7.5 million in the future.
Alexander Myasnikov, a spokesperson for the Russian New Coronary Pneumonia Epidemic Surveillance Information Center, said on the 21st that the Ministry of Health of the Russian Federation is developing a vaccine against the new coronavirus and plans to complete the preclinical study before May 31.
Russia’s infectious disease hospital, which specializes in treating patients with new coronary pneumonia, began to treat the first batch of patients on the 21st, a total of 20 patients. The hospital is located on the outskirts of Moscow, the capital of Russia, with a total area of 80,000 square meters and 800 beds, which can be increased to 900 if necessary. The hospital has purchased more than 26,000 pieces of medical equipment and equipment and can complete more than 10,000 new coronavirus tests per day. To save medical staff commuting time, the hospital has also built staff dormitories for medical staff.
As the most severely affected area in Russia, Moscow has successively introduced a series of restrictive measures in mid-to-late March, including the suspension of primary and secondary schools and various education and training institutions, and the suspension of major museums and exhibition halls in the city.
Also, from March 30, Moscow began to implement the regulations that all residents self-isolate at home. This regulation has very strict requirements. In addition to seeking emergency medical attention or having to go to work, there are also situations such as going to the nearest store or pharmacy to buy medicine, taking out the trash, and walking the dog within 100 meters of home. Violators will be fined.
The impact of the epidemic oil price is superimposed
The plunge in international crude oil prices has made the Russian economy worse. On Monday, the May WTI crude oil futures expiring on Tuesday in the New York market fell to a negative range in history, with a settlement price of -37.63 US dollars. On Tuesday, the crude oil collapse spread to the forward contract. The June WTI contract plummeted 43% on Tuesday, three times. The fuse was triggered and closed below $12 per barrel.
Warren Patterson, Head of Commodity Strategy at ING, pointed out that the emergence of negative oil prices is obviously shocking the market, and investors are worried that they might see the same in the June WTI contract or even the Brent market. Situation. “Although for the time being, because Brent crude oil is an offshore market, unlike the inland WTI market, which is limited by storage capacity, we believe that the May WTI crude oil futures are unlikely to happen in the Brent market. Also, Brent crude oil is settled in cash. Unlike WTI, which is delivered physically, the pressure on the bulls to liquidate their positions at maturity is also different.”
It is understood that Monday’s historic price plunge is largely the story of US crude oil, mainly due to the exhaustion of oil storage space by energy companies and aggravated market selling. Relatively speaking, this crazy scene of inverting money (subsidizing profits) for the removal of crude oil is of little significance to Russia, because the export sales price of Russian Urals crude oil is based on Brent quotations, not WTI quotations.
Nevertheless, the spillover effect of the WTI oil price collapse is spreading. On Tuesday, ICE Brent crude oil futures fell 24.4% to $19.33 per barrel. IHS Markit’s Russian energy consulting director Maxim Nechaev pointed out to the 21st Century Business Herald that “After the WTI price collapsed, the delivery price of Ural crude oil also bottomed out, at about US$10. /Barrel. If such a low price level is maintained for a few months, it will hurt Russia’s fiscal budget.”
Nechaev pointed out that in Russia, oil, and gas taxes-mineral resource extraction taxes and export taxes-account for about 40% of the federal budget (about 20% of Russia’s comprehensive budget). If the monthly average price of Urals stays below US$15/barrel, these two key taxes will be canceled because they have a threshold of US$15/barrel.
“Therefore, if oil and gas taxes are not received in the next 1-2 months, it may mean a loss of 4% to 8% of the federal budget. The annual contribution of the oil and gas industry to the 2020 budget may drop by as much as 60%. -70%, which erases most of the contribution of the oil and gas industry.” Nechaev said.
The plunge in WTI prices has allowed investors to reassess the oversupply situation in the market. OPEC+ held an emergency teleconference with the Minister of Energy on Tuesday to discuss the issue of the plummeting oil prices. Although the Director of the International Energy Agency urged a faster and more substantial production cut, the statement after the meeting showed that OPEC+ did not reach an agreement on any new measures.
Nechaev pointed out that if Russia complies with the OPEC+ production reduction agreement in April, it will need to cut production by about 1.7-1.8 million barrels per day in May and June, which is a reduction of 300,000 barrels per day during the six-month period in 2016. More than 10 times the scale. “Production cuts will bring huge technical difficulties, even after allowing production to gradually recover from the lowest level, it will have a long-term impact on the Russian oil industry.”
Besides, Nechaev pointed out that, like other oil companies, Russian companies have also announced a 20%-50% reduction in capital expenditures in 2020. Also, the unprecedented reduction in production will reduce Russia’s oil production 2020 by at least 1 million barrels per day, and the price of oil is much lower than expected, the gross profit margin of the Russian oil and gas industry will drop by 3-5 times.
“The problem with OPEC+ is that what they can do is limited. They are already preparing to implement production cuts, and it will be a struggle to fight for them to further reduce production.” Patterson believes that OPEC+ should have reached a production cut agreement earlier this month. Agree to start cutting expenses as soon as possible, “it’s a bit late now.”
The immediate effect is the pressure on the ruble. On Tuesday, the ruble exchange rate against the US dollar fell by more than 3%, and the transaction price was 77 to 1, the lowest level in three weeks. As of 19:10 on the 22nd, Beijing time, the exchange rate of the ruble against the US dollar rose slightly to 76.4 to 1.
Image Credits: USA Today