Russian macro: Rising oil prices will help the budget but won't boost the economy
As global markets are still enjoying various kinds of teeter-totter moves—mainly driven by regular war escalation/de-escalation rumors—fundamental economic factors remain either largely intact or are evolving much more gradually. As it is still widely believed that the Russian budget gets the bulk of its revenues from the oil sector, the recently soaring oil prices (including the Urals blend) encouraged some commentators and politicians to wake up and express concerns that Russia could be a major beneficiary of the situation in the Middle East because the US partially and temporarily lifted some restrictions on Russia’s oil trade (primarily with India). As it appears now, the effect of this relief on the Russian budget and the economy in general could be very limited as the lifted restrictions were related only to those tankers that were already loaded with the Russian oil and refined products as of March 12.
Overall global markets have been quite flexible, with prices moving faster than the restrictions imposed on volumes. This has enabled Russia to maintain financial stability for the time being. However, longer-term economic growth will largely depend on the evolution of the regulatory and institutional framework. In particular, the government might need to rethink its fiscal rule and its core element—the “cut off” oil price—as it may not be the perfect tool to regulate financial stability in an environment where restrictions on volumes of energy exports remain in place. The uncertainty associated with several global conflicts (either geopolitical or ideological) may persist, in line with the well-known principle: "You can't win, you can't break even, and you can't get out of the game." Interestingly, this principle coincides with the fundamental laws of thermodynamics.
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