Participants in global wholesale trading cannot track the origin of fuel they purchase, CEO points out

Russian supplies of liquefied natural gas (LNG) may still be shipped to German terminals despite the drastic shift in energy policy brought about by the EU in relation to Russia, according to Michael Lewis, the chief executive at that EU nation’s major utility company Uniper.

“Russia keeps selling LNG to the world market,” he said on Saturday in an interview with Germany’s Rheinische Post newspaper. “The wholesalers, including Uniper, do not always know the origin of the purchased gas.”

The company halted purchases of gas from Russia at the end of August 2022 after Brussels introduced sanctions against Russia over the military operation in Ukraine. In February, Uniper posted a record loss of €19.1 billion ($20.3 billion) for 2022, citing the complete freezing of the Russian gas supply as a major reason for the drop.

Germany is better prepared for an upcoming winter than a year ago as the country’s gas storage facilities are 95% full, according to Lewis, who has, however, warned of potential risks.

“If it gets very cold or there are problems with LNG purchases, then this winter could be tight,” the executive said. “If China’s economy grows and the need for LNG increases, Europe will face shortage of the fuel, as well as the price spikes.”

READ MORE: Russian gas fueled German industry – Uniper

Lewis stressed that concerns over sufficient gas supplies remained, adding that even minor disruption may provoke a surge in energy prices. Nonetheless, the top official doesn’t expect prices to rally as much as during the previous season.

The German Ministry of the Economy said that Berlin supports a halt to Russian supplies of LNG to Germany, but admits that it would be difficult for the country’s importers to abstain from Russian deliveries, as it is impossible to trace them.

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Remote and hybrid work are among the factors hurting the sector, according to investment bank Jefferies

The share of empty workspace in London’s main business hubs has hit its highest level in three decades, plunging the UK capital into a ‘rental recession’, investment bank Jefferies reported this week.

The bank’s analysts estimated that there has been a 20% contraction in the city’s office usage due to a post-pandemic hybrid work model and a shift to greener offices in the suburbs.

Flexible, co-working, and serviced offices account for about 9% of London’s space and have moved into some of the vacant facilities, according to the report.

“Retail was technology’s first casualty and we think offices are next. Utilization has shrunk and landlords are losing pricing power as tenants offload surplus space,” analysts said.

In its report, Jeffries downgraded commercial real estate companies British Land Company and Great Portland Estates, warning that the market will continue to shrink.

READ MORE: UK firms shedding staff as recession fears mount

Top financial managers recently raised concerns over London’s future, warning that the UK capital may lose its status as a leading financial center. A poll by Lloyds Bank revealed that 64% of sector leaders believe the City of London will stagnate as a global hub compared to its rivals.

For more stories on economy & finance visit RT's business section

The spike of nearly 30% is attributed to tight demand recorded from July through September

The world’s oil prices saw a massive quarter-on-quarter surge by nearly 30% in the July-to-September period this year, as supply is restricted due to production cuts agreed by OPEC and its allies, led by Russia.

Brent crude for November delivery dropped nearly 0.1%, at $95.31 per barrel on Friday, but was up 2.2% for the week, 9.7% higher for the month and gained 27.3% for the quarter. Meanwhile, November WTI crude fell a percentage point to settle at $90.79 per barrel, having scored a weekly gain of 0.8%, monthly advance of 8.6%, and ended 28.5% higher for the quarter.

Experts predict that the supply cuts announced by the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, are expected to dominate the global oil market for the rest of the year, while prices are projected to remain high. The Joint Ministerial Monitoring Committee panel of the alliance is scheduled for October 4.

Earlier this month, oil-producing heavyweight and de-facto leader of OPEC Saudi Arabia extended its one million barrel per day (bpd) voluntary oil production cut until the end of the year. Meanwhile, its OPEC+ ally and the world’s second-largest crude producer, Russia, has also recently pledged to extend its voluntary cut in oil exports by 300,000 bpd until the end of the year.

READ MORE: Russia ‘making a fortune’ – Trump

Last week, the Russian government introduced a temporary ban on foreign sales of diesel and gasoline in order to stabilize the domestic fuel market.

In addition and of particular concern is the tightening of supplies at Cushing, Oklahoma, the delivery hub for Nymex WTI futures, as stocks there fell by 943,000 barrels in the fourth week of September due to strong refining and export demand.

For more stories on economy & finance visit RT's business section

What are the reasons for leaders decommissioning virtual water coolers?

Somewhere in a remote Russian village, there was a frog sitting in a rut. His amphibian fellows beseeched him to leave the prison-like furrow to live a better life in freedom. Yet the batrachian stubbornly refused to do so, since he wanted to avoid the effort, albeit small, of jumping out of the rut. One day, a horse-drawn carriage approached. When it was very close, the frog immediately jumped out of the track to prevent being crushed. 

This is where the frog story usually ends. It illustrates how a sense of urgency (to use change management jargon) sometimes can act as a powerful push to alter one’s habits without further ado, even if those are deeply engrained. The sudden switch to work from home (WFH) during the COVID-19 pandemic is an example of such a sudden, dramatic behavioral shift due to an external shock.

In the WFH case, the only – and fundamental – difference to the story line is this: After the pandemic, the frog jumped back into the rut! Translated to the world of work, the following trend emerged: leaders and their employees around the globe (i.e., the frogs), already accustomed to the freedom of operating virtually, returned to physical offices (i.e. the rut) due to new, stringent in-house work requirements (see Prof. Schlevogt’s Compass №3). 

My “Inverted office power pyramid” model (see Figure 1) explains the seemingly unstoppable trend of bosses calling their employees back to the office after a prolonged period of WFH. It covers the following levels: (1) Organizational economic, (2) behavioral economic, (3) leadership and managerial, and (4) personal.

Figure 1

In my previous column (see Prof. Schlevogt’s Compass № 4), I analyzed the first two levels, discussing the following reasons for office mandates: (1) The office facilitates the cost-efficient internalization of transaction costs, (2) the office can act as a potent remedy for the principal-agent problem, and (3) behavioral biases are reinforcing the back-to-office movement. Apart from these reasons, there are the following additional factors, which explain office mandates at the leadership-related and managerial level.

4. Effective exercise of leadership  

For a long time, modern management experts believed that to succeed, an executive needs to sit at his desk and fulfill the classic functions proposed by Henri Fayol, a French thinker on business administration. Those included developing (usually grand) plans, organizing, commanding, coordinating, and controlling. In stark contrast, through extensive field research, Harvard Business School Professor John Kotter unearthed a completely different answer to his question of what effective general managers really do. In particular, he discovered that those individuals act in a significantly less systematic, proactive, deliberate, reflective, formal, organized and disciplined way than previously expected. Kotter’s research on how managers in actuality are spending their time revealed a fragmented pattern, with executives engaging in many informal meetings, which helped them to develop agendas and networks. The findings apply to leaders, too.

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Similarly, according to the concept of ‘Managing by walking around’ (MBWA), it makes great sense for executives to simply wander through the office in a planless and random fashion to get a sense of the state of work, discover problems, and boost morale. This technique, which is comparable to the Japanese ‘Gemba walk,’ contrasts with the previous traditional prescription for managers to sit in their office and simply wait for formal and scheduled status reports from their subordinates. Due to well-known recurring processes, in the classic model, these employees usually have sufficient time and leeway to build Potemkin villages (facades without substance) designed to fool the corporate czar.

Given the great benefits of the overarching and integrative concept of what I call “leadership in the hallway”, bosses – in an oxymoronic, quixotic, and pitiable attempt to structure spontaneity – tried to put in place interactive substitutes for remote workers during the COVID-19 pandemic. Perhaps the epitome of attempts made at imitating the office, to make up for the deficiencies of remote work, is the ‘virtual water cooler.’ In essence, this was a digital meeting place where teleworkers were welcomed (and, frankly, supposed) to gather whenever they had time. Such virtual replacements for non-scheduled and informal personal interaction between leaders and their followers and among followers did not produce satisfying results, though.

For example, as a rule, comparatively few teleworkers showed up at the virtual water cooler during their free time between a series of demanding and exhausting video conferences. Among other things, a visit to the waterless fountain for them would have signified yet more time to be spent in front of their loathed computer screens, possibly while their young children were crying somewhere in the background. This scenario contrasted sharply with the previous relaxing break in the office, which afforded an opportunity to quench one’s thirst not just for water, but also for spontaneous, non-supervised socializing, including much-desired chatting.

Due to the comparative ineffectiveness of the virtual surrogate, managers are now increasingly decommissioning virtual water coolers and instead are calling their staff back to the office, where everyone again can engage in spontaneous, “miraculous” hallway conversations at liberty and ad libitum.

In general, the effective exercise of personal leadership – especially the charismatic variant, conceptualized by the German sociologist Max Weber (1864 -1920) – hinges on personal contact, be it in the hallway or office rooms. In propaganda classes during the time of the Soviet Union, students used to learn that indoctrination is most effective if the respective messages are delivered face-to-face and that it is very important to engage people in personal discussions to convince them. In contrast, reliance on virtual leadership or artificial intelligence makes it very difficult to role-model desirable behavior, inspire others and to transform them. Virtual ‘leadership’ is particularly problematic given the modern tendency of organizations to be over-administered, but underled (cf. Bennis, Warren G., & Nanus, Burt. (1985). Leaders: The strategies for taking charge. New York: Harper & Row.). The leadership gap has widened in recent times, during which compliance with political correctness mandates and complex regulations seems to be more important than creativity and innovation.

It might be argued that strategic leadership (the leadership of entire organizations as opposed to personal leadership) in an organization of considerable scale is different, because a leader of a large entity may never meet all subordinates in-the-flesh; therefore, some may argue, leadership could as well be exercised virtually. For example, the ancient Greek historian Xenophon in his book Cyropaedia praised king Cyrus the Great for exercising effective leadership over subjects in widely dispersed territories, who had never seen him, but still followed him. However, this argument in favor of virtual leadership only allows us to shift the fundamental problem to a lower level. This is because great strategic leaders build a strong bench of subordinate leaders at various levels in the hierarchy who will need to exercise leadership face-to-face.

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Finally, a ‘cascading effect’ will most likely boost office attendance. If leaders show up in the office five days a week, employees probably will feel morally obliged to follow suit; if not, leaders will use their power to ensure compliance.

5. Organizational development imperatives

Developing an organization requires intensive office work and cannot be done exclusively remotely. This is one of the key points mentioned in a series of internal missives that top leaders at renowned companies such as Amazon, BlackRock, JPMorgan and News Corp. issued to their employees, to explain them why they called them back to the office. An in-depth look at some of the pivotal processes of an organization is helpful to understand this issue.

Collaborating and competing

Let us start with an insight from economics. Many types of modern collective work processes can be theoretically understood using the concept of ‘team production,’ which is characterized by a ‘joint production function’ (cf. Milgrom, Paul, & Roberts, John. (1992). Economics, organization, and management.) This means that the output of a group is created jointly by its members, is interwoven, and cannot be divided into discreet parts. This makes it impossible to identify and measure individual contributions. An example is the outcome of an informal brainstorming session.

In the case of team production, tasks cannot be parceled out and assigned to remote employees working in isolation. In addition, intensive collaboration, which is a necessary condition for the success of team production, is partially inhibited by the artificial constraints inherent in virtual communication. Such exchanges are reductionist in nature, contrasting with the richness of in-the-flesh communication. An example of this phenomenon is a pale and boring video conference via Zoom, in which – so far at least – participants can only speak sequentially. Even if they were to speak all at the same time, the resulting mishmash would be more difficult to disentangle virtually than in the office. Moreover, it is extremely difficult to integrate several dispersed teleworking teams.

These theoretical points are supported by practitioners’ testimonies. For example, John Stankey, the CEO of the telecommunication company AT&T, insisted in a conversation with the news agency Bloomberg that some things need to “be done sitting side by side”. In an internal missive cited by Bloomberg, the CEO of the media conglomerate News Corp., Robert Thomson, stressed that “attendance is an absolute imperative as collaboration and cooperation are priorities for each of our business.” 

Besides, non-verbal communication, which is a key component of human interaction, is more difficult to observe virtually than during in-person meetings in the office. In the above mentioned memo, the CEO of News Corp., Robert Thomson, stated eloquently that WFH provides no space for the “subtleties of body language and the nuances of knowing glances.” The CEO of the asset-management firm BlackRock, Rob Goldstein, made the following statement in an internal missive: “We have felt the energy generated by being together, in our larger offices, our newer spaces... this energy, and the horizontal collaboration it powers, are what make BlackRock so special.” In addition, if – to use a modified version of an aphorism of the French writer Antoine de Saint-Exupéry (1900-1944) – harmony in teamwork consists not only of gazing at each other, but also of looking in the same direction, such harmony at present cannot be achieved virtually.

Finally, in the case of team production, there is a strong incentive for participants to shirk, since individual output cannot be observed. This is known as the ‘free rider problem,’ which occurs in some rowing teams, for instance. In such cases, individual behavior (in particular individual efforts) needs to be monitored instead of futile attempts to discern individual output. Again, such monitoring is easier done in the office than remotely.

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The antidote to collaboration is competition, which – in healthy doses – is also crucial for an organization. Internal rivalry works better in an office, where you can literally feel and suck in the breath of your situational opponent, than remotely. To understand this point, just contrast the reality of an exciting F1 race, which engages all human senses, with a comparatively pale racing game on the computer screen.

Promoting learning

The success of an organization critically depends on its ability to enable its members to learn continuously and to store the results of such learning in its institutional memory. Yet again, work from home impedes the acquisition of competencies and knowledge in certain cases. For example, the magazine “The Economist” reported that workers in offices were found to gain new skills, an important constituent of human capital, more quickly than remote workers.

In particular, ‘learning through osmosis’ – at least with respect to the entirety of its dimensions – seems to be impossible virtually. Applying the concept of osmosis, which in biology is the movement of liquid through an organism’s membranes (cell coverings), to an organization, we can conclude the following: The process of incidentally and passively absorbing skills and knowledge, for instance, through automatic imitation of a role model, depends on personal contact through permeable ‘analog’ membranes. An example of such spontaneous learning would be to look a more experienced colleague over the shoulder and instinctively copy what he or she is doing. In contrast, such osmosis in its full richness cannot happen if there are rigid electronic walls between the transmitter (a superior or some other person) and the potential recipient. The above comments also apply to more formalized learning. Just compare an apprentice who is learning from a master, who guides his hands, to one who must learn a craft from home, possibly through recorded teaching sessions only.

Furthermore, it is more difficult to leverage spontaneous teaching and mentoring opportunities remotely than in-house. This point is supported by the following remark that the above-mentioned CEO of BlackRock made to justify office mandates: “Career development happens in teaching moments between team members, and it is accelerated during market-moving moments... All of this requires us to be together in the office.” Naturally, it is also more challenging to ask for assistance in a highly structured virtual environment than in an organic office setting. The operating committee of JPMorgan stated in an internal missive, which was leaked to the Financial Times, that its leaders “have to be visible on the floor, they must meet with clients, they need to teach and advise, and they should always be accessible for immediate feedback and impromptu meetings,” stressing that such presence accelerates learning, among other things.

Worse, apart from just slowing down or preventing learning (that is, a problem of underdevelopment), telework can lead to a degrading of skills. This is partially due to a reduction in feedback when work is shifted to the home.

Moreover, PwC and Deloitte found that graduates, whose studies had been interrupted by a period of remote work during the COVID-19 pandemic, performed worse on crucial performance parameters such as teamwork, communication skills, confidence, networking, adaptability, and resilience than previous intakes who had studied only in presence. As a consequence, these professional-services firms decided to offer special make-up courses and coaching for the deficient target segment.

Fostering creativity and innovation 

Work from home also exerts a negative influence on creativity and innovation, which is closely connected to moving up the learning curve and thus is impacted in similar ways. Rob Goldstein, the CEO of BlackRock, made the following remark in the internal missive cited above: “When fast-moving, high-client-interest events are happening, having our teams physically together to find solutions, seize opportunities and learn from each other makes a difference.”

Furthermore, a Stanford economics professor, Nicholas Bloom, found that it is more difficult to challenge superiors virtually than in the office. One reason might be the fear of subordinates that all of their remarks are recorded and could be used against them in the future. However, critical and candid feedback is important for pinpointing problems and finding new solutions.

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Moreover, the lack of spontaneous encounters, such as unscheduled hallway conversations, impedes out-of-the box thinking and innovation. For example, blinded by success, the management of Silicon Valley Bank (SVB), the collapsed US bank focusing on financing high-tech startups, failed to envision the negative outcome of a highly risky securities bet and to hedge against it. One reason for this lack of alternative views might have been the fact that the bank relied almost entirely on remote work and lacked effective face-to-face channels to discuss this business decision, formally and informally.

In addition, many people regard video calls as a veritable killer of creative thinking. Rather ironically, new technological solutions are being created to compensate for the problems that technology created in the first place – a movement that at times goes full circle. For example, Microsoft introduced a feature that makes it possible to use an animated 3D avatar (an image that represents a user) to disguise one’s face in a ‘Team meetings’ video call. In essence, it thus enabled users to convert a video call back into a traditional phone call, which, however, is laden with new problems. For example, giving feedback and looking for innovative solutions might be particularly uncomfortable when you need to deal with masks. 

In addition, especially new employees often see many opportunities for improvement during what I call an ‘innovation honeymoon’. If they are getting on board remotely only, the possibility of discovering improvement potential in hidden corners diminishes dramatically.

Developing the organizational culture, trust and networks

To make a judgment about the future of the office, many people are just inquiring whether a given activity could be performed from home, too. According to this logic, an organization would not be needed at all if all tasks could be completed remotely. But this type of reasoning misses the following crucial point: An organization is more than just the sum of its parts or a bundle of activities. Instead, it often is comprised of valuable intangible assets, including organizational culture and esprit de corps. Constituting the set of values of an entity, culture is the glue that holds an entity together. It fills the holes in contracts, which cannot be perfect in an uncertain and complex world. It thus prevents to some degree undesirable postcontractual opportunism. Esprit de corps is morale, enabling an organization to face adversity.

The development of a strong culture and morale hinges on organizational members interacting personally in the office on a regular basis. Occasional offsite events cannot effectively substitute for such constant culture building. In the above-mentioned corporate memo, the operating committee of the investment bank JPMorgan justified office mandates for its managing directors by stressing the following point: “Our leaders play a critical role in reinforcing our culture.” Amazon’s CEO, Andy Jassy, nostalgically justified his call for office attendance in an internal blog as follows: “There is something about being face-to-face with somebody, looking them in the eye and seeing they’re fully immersed in whatever you’re discussing that bonds people together”.

In the final analysis, a strong culture and esprit de corps can only be perpetuated if new hires are inculcated with their organization’s values. Office time matters particularly for this group, because it makes it possible for its members to absorb organizational values hands-on from personal role models, especially organizational leaders, both in structured and unstructured formats. As a rule, during the COVID-19 lockdowns, universities around the world found it impossible to enculturate new students, whose study experience consisted only in a permanent stream of video conferences. This resulted in pervasive desperation and lack of orientation among this group of students. Furthermore, it is particularly challenging to develop a culture of empathy in a remote-only setting where it is more difficult to gauge a person’s feelings than in an office, where you can intensively observe your colleagues at will. 

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Moreover, SVB, the above-mentioned financial institution, encountered great difficulties in socializing a large number of new staff hired both as replacements for numerous resignations and to accommodate its rapid growth, since it relied almost entirely on remote work. By the same token, after the Great Resignation in the aftermath of the COVID-19 pandemic and frequent switches of workers to new employers, the office will grow in importance, because it is a better place for enculturating newcomers than a workplace at home, where a job consists only of a permanent video conference.

In addition, the development of trust hinges on frequent face-to-face interaction with people and knowing them well. One reason for this tendency is that due to proximity bias, humans are prone to place more trust in those who are nearby rather than far away. Undoubtedly, a great amount of trust has been lost during the WFH spree. Now the office will be a crucial place to rebuild this type of invaluable intangible capital.

Finally, building social capital (the value embedded in relationships) also critically depends on personal encounters in a physical office. In contrast, according to The Economist, the barriers created by the radical switch to remote-only engagements led to more static and encapsulated networks. It is important to consider interdependencies, too. Without stable networks, it is very difficult to store knowledge internally.

As shown in my ‘Inverted office power pyramid’, a final layer of factors explaining the recent push for office attendance can be found at the personal level and concerns personal needs. [To be continued]

Prof. Schlevogt's next column will unearth additional fundamental forces at work driving the seemingly unstoppable return-to-office megatrend at the personal level. 

Note to readers: Please feel free to submit your questions related to a wide variety of political-economic issues in the comment section of this column. Prof. Schlevogt will subsequently endeavor to address these issues in his future columns.

Sber also earns title of fourth most-valuable European lender

Russian state-run lender Sber (formerly Sberbank) has won the title of strongest brand among European financial institutions, according to the latest issue of the annual Brand Finance Europe 500 rating.

The London-based consultancy Brand Finance puts 5,000 of the biggest names to the test, and publishes over 100 reports, ranking firms across all sectors and countries. The world’s top 500 most valuable and strongest European brands are featured in the annual Europe 500 2023 ranking.

The strength of brands is based on marketing investment, stakeholder equity, and business performance, and shows how effectively a company invests, develops brand awareness, takes care of its reputation and establishes customer loyalty, and how successfully it operates its business.

Outpaced by HSBC, Santander and Barclays, Sber was also ranked the fourth most-valuable bank in Europe. In addition, the Russian banking giant entered the top 40 of the Brand Value Ranking, having been placed 37th.

READ MORE: Top Russian lender leaves EU

Moreover, Sber was named as the seventh strongest European brand, with a Brand Strength Index score of 88.2/100, ahead of Michelin, Lamborghini and Rolex.

“The Brand Finance report shows that despite the difficult conditions in foreign markets, the Russian bank demonstrates strong financial results, keeps developing innovative products and world-class services, maintains the trust of more than 110 million private and corporate clients, remaining among the top most valuable and powerful European brands,” Sber's press office said in a statement.

For more stories on economy & finance visit RT's business section

A prominent UAE firm plans to go forward with construction projects in Moscow

UAE developer Reportage Properties plans to launch construction projects in Russia in the near future, the company’s managing director Andrea Nucera told reporters this week.

He said three sites are currently being considered, including one in the south of Moscow. Negotiations are reportedly underway on cooperation with a local developer.

“The implementation of the projects is planned to begin in the next nine to twelve months,” Nuchera announced.

The UAE company’s financial model does not involve credit funds, its managing director explained, noting that the firm can easily adapt to local legislation.

In the meantime, a sales office has been opened in Moscow to coordinate projects which are currently being developed in other countries, Nucera said. Reportage Properties reportedly also aims to enter the Belarusian market.

Founded in 2014 in Abu Dhabi, Reportage Properties is one of the largest private developers in the United Arab Emirates, with projects in the UAE, Egypt, Türkiye, Morocco, Saudi Arabia, and other countries.

READ MORE: Russian real estate investment booming – report

A recent study by IBC Real Estate showed that investment in Russian real estate surged 75% as of mid-September in annual terms. By the end of 2023, the figure is expected to break last year’s record of $6.2 billion.

For more stories on economy & finance visit RT's business section

US Treasury chief Janet Yellen says Russia has maintained export volumes and prices remain high despite the limits

The price cap imposed on Russian oil by the G7 countries is not working as intended, US Treasury Secretary Janet Yellen said on Friday, as quoted by Bloomberg. She said market prices for crude exported from the sanctions-hit nation remain high.

A $60-per-barrel price ceiling on Russian seaborne crude was introduced by the EU, G7 countries, and Australia on December 5. It prohibits Western firms from providing insurance and other services to shipments of Russian crude, unless the cargo is purchased at or below the set price.

The mechanism was intended to force Russia to continue exporting high volumes of oil to prevent global prices from spiking, but reduce the revenue that Moscow generates by selling its crude.

“It does point to some reduction in the effectiveness of the price cap,” Yellen said during her visit to Savannah, Georgia in response to a question about Russian crude prices, which are now hovering around $100 per barrel instead of the $60 set by the cap.

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Bloomberg reported that Moscow had initially tried to replace shipping and insurance service providers, but succeeded in developing its own alternatives in recent months.

“Russia has spent a great deal of money and time and effort to provide services for the export of its oil,” Yellen said. “They have added to their shadow fleet, provided more insurance and that kind of trade is not prohibited by the price cap.”

The Treasury chief pledged to enforce efforts to prevent evasion of the restrictions, but provided no details about any specific new measures.

“We are more than prepared to take action,” she said, adding that the G7 was ready to “consider over time whether there are ways that might make this policy more effective.”

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Oil and gas profits are expected to soar by 30% next year, according to a report

Russia’s revenues from oil and gas exports could surge by almost a third next year, the country’s Finance Ministry stated in a budget policy document published on Thursday.   

According to the ministry’s forecast, Russia’s proceeds from oil and gas sales are set to rise by 30% in 2024, from $91 billion to $118.2 billion. They are also predicted to account for 6.4% of GDP, compared to 5.3% this year. 

A further increase in energy revenues to $121.3 billion is expected for 2025, while in 2026 the ministry projects that they will decline to $117.1 billion.  

By 2026, the share of oil and gas income in Russia’s GDP will decrease to 5.6%, according to the forecast, which attributed the predicted decline to a “stabilization of the price environment and an increase in the share of oil production at fields with preferential tax treatment.”  

The Russian government plans to continue reducing discounts on Urals crude to the Brent benchmark. According to the report, the discount is expected to gradually decrease from the current $20 per barrel to $6 per barrel in 2026. Next year, the discount will stand at $15 per barrel and in 2025 it is expected to be $10.  

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Moscow has changed the way it assesses crude prices for tax purposes after the EU and G7 imposed a ban and a price cap on purchases of Russian oil in December. The move is aimed at offsetting the effect that the drop in prices for Urals crude was having on budget revenues. The price of Urals has at times been around $35 to $40 per barrel lower than that of Brent. 

In July, Russian President Vladimir Putin signed into law amendments in the tax code for the energy sector to reduce the discount on Urals crude to Brent from $25 per barrel to $20, starting in September.  

According to Reuters calculations, Russia’s oil and gas revenues are due to rise to around $7.5 billion in September, up 14% from the previous month. In September 2022, the corresponding figure was $7 billion.

The rise reflects a 24% month-on-month increase to $11.2 billion in proceeds from a mineral extraction tax, according to the calculations, based on data from industry sources and official statistics on oil and gas production.

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Beijing has agreed to allow pork imports from Russia after a 15-year halt, with the first deliveries expected by mid-2024

China has lifted a ban on imports of qualified Russian pork, Russian agricultural watchdog Rosselkhoznadzor announced on Thursday. Restrictions were initially imposed in 2008 after an outbreak of African swine fever (ASF).

According to China’s General Administration of Customs (GAC), the decision was made following a thorough check of Russia’s system of ASF control. Under the new regulations, pork imports will be allowed from Russian regions which are proven to be free of the virus. Rosselkhoznadzor noted that Chinese customs officials will formulate inspection and quarantine requirements for Russian pork supplies in the coming months.

Russia’s Ministry of Economic Development announced on Friday that the first deliveries of pork to the Chinese market are scheduled for the second to third quarter of 2024. The delay is due to regulatory procedures Russia must pass prior to launching deliveries. The measures include Russia and China signing a protocol on the requirements for pork supplies, while exporters must obtain veterinary certificates and register in the system of Chinese food suppliers.

“China holds the leading position globally in terms of the volume of pork consumption by the population. We consider the Chinese market the most promising for the supply of our domestic pork products,” the head of the ministry, Maksim Reshetnikov, told reporters.

Yury Kovalev, the head of Russia’s National Union of Pork Producers, told Vedomosti that the removal of the ban is the result of Russia’s extensive work to contain African swine fever and create a satisfactory control system. He noted that fewer and fewer countries are free of the virus, making it important to introduce and amend import controls but refrain from sweeping bans.

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In September, Rosselkhoznadzor registered ten cases of pork infected with African swine fever in Russian stores. While not dangerous for humans, the virus is easily transmitted and is deadly for pigs. According to the watchdog, one of the main reasons for the spread of ASF is the use of food waste for livestock feed.

Kovalev noted that Russia will face significant competition once it returns to the Chinese market. According to his estimates, China imports between 2.5 and 3 million tons of pork products annually.

“The competition will be fierce [but] even if we can get 5-7% of this market, it will be a great success,” he stated, noting that Russia could double the volume of its total pork product exports.

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The modern financial system only serves the interest of the elites, according to the Russian president

The global economic system is structured to serve the interests of the Western elite, while developing countries are forced to borrow money at exorbitant interest rates, Russian President Vladimir Putin has stated.

Speaking at the Russia-Latin America Parliamentary Conference on Friday, Putin said global elites are exploiting almost all other countries, particularly in the areas of technology, information, and finance.

The Russian president claimed that loan obligations for developing markets are already akin to feudal “quitrents,” calling for an end to the practice.

“Therefore, we all have to work together to change the rules of the global (financial) system,” Putin urged.

The Russian leader previously proclaimed that the “myth of the Western welfare state, of the so-called ‘golden billion’, is crumbling.” According to Putin, the latest sanctions imposed on Russia by the US and its allies mark the end of an era.

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Moscow and its trade partners should switch to transactions in national currencies, Andrey Kostin believes

Russia should abandon the use of the Western-controlled global financial messaging system SWIFT, the head of Russia's second-largest bank has argued.

VTB CEO Andrey Kostin has been persistently calling for the increased use of domestic currencies by Russia and its trade partners, describing it as a sanctions-induced necessity.

“We need to kill SWIFT in our transactions, the issue is quite simple, but it will require certain actions, including within individual countries,” Kostin stated on Friday at the International Banking Forum in Sochi.

He noted that most of Russia’s payments are already made in national currencies, including in trade with China, Indonesia, India, as well as Arab and African states.

“De facto, such a shift towards financial settlements in national currencies with the Global South is already being implemented to a large extent,” Kostin said.

READ MORE: Share of dollar in global payments rising – SWIFT  

According to the banker, the process is irreversible, as more and more countries realize they could be next targets of the West’s use of the dollar and euro as political tools.

Earlier this month, Kostin told RT that the Global South should establish a new financial system based on national currencies in order to mitigate the risks posed by the West. He insisted that the dollar, and the entire Western financial system built around it, has been jeopardized by the sanctions on Russia. The banker noted, however, that the goal is not to fight the Western financial system but to build a parallel system that will work to the benefit of the Global South.

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The country is exempt from the EU-wide ban on Russian crude purchases

Bulgaria plans to wean itself from Russian oil by next fall despite being exempt from the EU-wide ban on crude purchases from the sanctioned country, Bloomberg reported on Thursday, citing officials.

The Balkan country had been allowed to continue buying seaborne Russian oil for its Neftohim refinery, owned by Russia’s Lukoil, until the end of 2024 as part of the sixth package of EU’s Ukraine-related sanctions on Moscow.

According to the report, on Thursday, lawmakers in Sofia approved a motion to cut the use of Russian oil at Neftohim to 80% by the end of this year and stop using crude from Russia at the refinery completely by October next year.

“The question of moving off Russian oil for the refinery is mainly a logistics question. In order to move to non-Black Sea oil, the actual storage capacity needs to be increased substantially – maybe doubled – so that the refinery can work 20, 30 days potentially without a tanker coming in,” Bloomberg cited Bulgarian Finance Minister Assen Vassilev as saying.

Analysts warn, however, that the move could pose problems as the refinery largely processes Russian Urals grade oil and will have to look for suitable alternatives as soon as possible. The refinery is responsible for most of Bulgaria’s diesel and gasoline supplies, and any interruptions to its operation could affect the local fuel market.

Ahead of the vote, Lukoil Neftochim Burgas, the refinery’s operator, said the motion threatens the operational stability of the plant.

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“We would like to emphasize that the suggested timeframe for transitioning to an alternative raw material source is unrealistic to execute. In such a scenario, we cannot assure the uninterrupted operation of our enterprise, a commitment we have maintained for the past 25 years. Given these conditions, it is likely that all fuel consumers will end up losing out,” the operator warned in a statement earlier this month.

Neftohim is located in the city of Burgas on Bulgaria’s Black Sea coast. According to Lukoil’s website, it is the largest oil refinery on the Balkan Peninsula. The company has owned the plant since 1999.

Shipments of Russian oil to Bulgaria have been on the rise in recent weeks, reaching an average of 180,000 barrels a day, triple the levels recorded earlier this year, Bloomberg noted, citing tanker tracking data.

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The country’s growth is at risk of falling to zero, Ray Dalio claims

A US debt crisis is looming as the American economy is facing a “risky” fiscal situation, according to the founder of the world’s largest hedge fund, Bridgewater Associates, Ray Dalio.

Dalio’s warning comes as the country’s national debt topped $33 trillion this month. US lawmakers are currently negotiating a spending bill before the October 1 deadline.

“We’re going to have a debt crisis in this country,” Dalio told CNBC in an interview that aired Thursday. “How fast it transpires, I think, is going to be a function of that supply-demand issue, so I’m watching that very closely.”

According to the US Treasury Department, the country’s debt levels have skyrocketed in recent years, particularly after a roughly 50% jump in federal spending between fiscal 2019 and fiscal 2021. Investors have been raising concerns that interest rates may continue rising as the situation worsens.

Dalio has cautioned there could be more headwinds hitting the economy than just high debt levels, with the risk that growth may fall to zero. “I think you’re going to get a meaningful slowing of the economy,” the billionaire warned.

The US averted a historic default earlier this year after President Joe Biden signed a bill suspending Washington’s $31.4 trillion debt limit just two days before the deadline in June. The debt ceiling was lifted through January 1, 2025.

READ MORE: US national debt passes new landmark

However, the fact that the US was close to failing on its massive debt could hurt the country’s fiscal reputation, analysts have signaled.

In August, rating agency Fitch slashed the USA’s credit rating, citing fiscal deterioration over the next three years and repeated debt-ceiling talks. Earlier this week, rating agency Moody’s warned that a possible government shutdown on October 1 would put pressure on the country’s credit rating.

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The pivot to Asia has made recovery more sustainable, Maksim Oreshkin says

Western sanctions have forced Russia to restructure its economy and reorient towards rapidly developing markets in Asia, Kremlin adviser Maksim Oreshkin said at the Moscow Financial Forum on Thursday.

According to the official, the shift towards the “healthy part of the global economy” has allowed Russia’s recovery to become more sustainable. The country can also meet its objectives in a variety of areas, from defense and security to technological advancement and educational development, he added.

“In fact, what we’ve done over the past year and a half is a very big structural reform. A structural reform that switched the Russian economy, its focus, from the sick part of the global economy towards the healthy one,” Oreshkin stated.

He noted that the changes are ongoing and at certain points have been “painful,” as the country was faced with multiple challenges all at once, including reorienting logistics systems and creating new payment mechanisms.

However, without sanctions and the changes they brought, Russia would now be worrying about the crises plaguing Western countries instead of looking forward to the benefits of working with fast-growing economies such as India and China, according to Oreshkin.

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“If we stayed in the past, we’d be sitting around right now discussing Germany’s recession and how bad it is for us. Or that America can’t cope with its financial sector instability. It is far more important for us now that China’s economy accelerated 6.5% in the second quarter and India’s economy grew 7.8%,” he argued.

Russia’s gross domestic product shrank by 2.1% last year amid severe economic restrictions imposed by Western states, according to official statistics from Rosstat. However, by the end of 2023, the Finance Ministry expects the economy to grow by 2.5%.

Over the past year, Moscow has gradually strengthened trade ties with partners in Asia, Africa, and South America. Russia has become the largest oil supplier to India and China, and is now the top provider of gold to the UAE. Earlier this month, President Vladimir Putin said that the economy has completely recovered from last year’s downturn, noting that GDP has already reached pre-sanctions levels.

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Employment has dropped for the first time in three years, a survey shows

Hiring in Germany has stalled amid a worsening economic environment as the country continues to struggle with an energy crisis and soaring borrowing costs, Bloomberg reported on Wednesday, citing the German Ifo Institute for Economic Research.  

A measure reflecting hiring activity dropped to its lowest level since February 2021 this month, as employers in manufacturing and construction are thinking twice before taking on new staff, the study revealed.

“The robust expansion of employment seen over the past few months has come to a standstill,” said Klaus Wohlrabe, head of surveys at Ifo. “Due to a lack of orders, companies are being rather cautious about filling vacant positions.”

Economists say that the German labor market is showing the first cracks in what had been until now a “very resilient” environment and is now losing steam as overall economic activity weakens. Unemployment is expected to further increase until the economy recovers, experts warn.

READ MORE: Germany at risk of becoming ‘Sick Man of Europe’ – Deutsche Bank

“Companies’ willingness to hire new staff will presumably rise again once the economy recovers,” Wohlrabe said. “In the medium term, demographic change will deprive the labor market of more and more workers.”

Hirings in the EU’s largest economy dropped for the first time in nearly three years, a separate survey of purchasing managers showed last week. This comes as businesses and industry are increasingly pessimistic regarding Germany’s economic outlook amid weaker external demand and a lack of orders, as well as shortages of qualified workers and tighter monetary policy.

Germany’s economy officially slipped into a technical recession in the first quarter of the year after contracting by 0.3%. Its GDP is expected to shrink by another 0.5% by the year’s end.

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The US currency was used in nearly half of cross-border transactions last month, data shows

The share of the US dollar in international payments via the SWIFT financial messaging system reached 48% in August, the highest level since such data began being collected, RIA Novosti has reported after analyzing SWIFT data.    

The greenback’s share in global transactions rose by 1.57% compared to July, strengthening the position of the American currency in international settlements, the outlet reported on Thursday.   

Meanwhile, the share of the euro slumped to an historic low of 23.2% last month, down from 36.44% in August 2022, data showed. Experts attributed the euro’s slide to its declining popularity beyond the bloc of 20 countries that use the currency.   

Meanwhile, the Chinese yuan showed record gains last month, as its share in international payments rose to 3.47%, up from 3.06% in July. 

READ MORE: Russia sanctions threaten US dollar – EBRD

The growing share of the yuan in cross-border transactions reflects China’s trend of shifting away from the dollar, as well as Beijing’s efforts to promote the use of its national currency, the outlet reports.  

However, earlier this month, former International Monetary Fund and Morgan Stanley economist Stephen Jen said the dollar’s share in foreign reserves has actually lost about 11% since 2016. The economist argues that most analysts evaluate the nominal value of central banks’ dollar holdings on the basis of data released by the IMF and don’t take into account the currency’s depreciation.

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Regional authorities should support businesses willing to fill the void left by Western firms, the president has urged

Western pressure on Russia intended to strangle the country’s economy has in reality turned out to be a powerful incentive for the development of domestic industries, President Vladimir Putin said on Thursday.

He stressed that authorities at all levels should support businesses willing to fill the void left by departing Western firms.

“External pressure has ultimately become a powerful incentive for the growth of our own production, unlocking our own potential in a variety of areas. And, of course, we need to continue to work closely with the government, federal and municipal authorities to provide the necessary support to companies and enterprises that are ready to occupy vacated niches,” he told a meeting of the elected heads of Russia’s regions.

According to the president, the Russian economy requires ready-made solutions in a range of sectors, and particularly in hi-tech where demand is high.

READ MORE: Putin wants ‘high-wage economy’

Putin identified the development of local economies as the key task for improving the welfare of Russian families and boosting their real incomes and urged authorities to encourage investment and business activity in the country’s regions.

The Russian leader emphasized that Western restrictions meant to weaken Russia are propelling its economic growth and offering new opportunities for creating jobs and strengthening education and technology in the country.

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Moscow is benefitting from high oil prices, the former US president has claimed

Soaring energy prices have boosted Russia’s revenues, while the US is facing major economic threats due to its transition to clean energy, former President Donald Trump claimed on Wednesday.

Addressing supporters at Drake Enterprises, a non-union auto parts manufacturer near Detroit, Trump condemned the administration of President Joe Biden for its policies on electric vehicles (EV) and clean energy, branding them a danger to the US auto industry. The shift to EV will kill jobs at America’s biggest carmakers and eventually make them obsolete, Trump warned.

“For auto workers, Biden’s transition to electric is a transition to hell,” the former president declared. “A transition to unemployment.” 

According to Trump, the US was “more energy-independent” than Russia and China during his tenure as president, while now “we are begging countries to give us gasoline.” 

“We are going to lose our country,” Trump warned, arguing that Moscow has “made a fortune” and continues to benefit from high oil prices.

READ MORE: Russian energy revenues grow year-on-year – Handelsblatt

Global oil prices have surged by 30% since June after voluntary production cuts by OPEC and allies led by Russia. On Thursday, prices reached their highest level in over a year, with benchmark Brent rising above $97 a barrel. US West Texas Intermediate futures touched $95 per barrel, marking the highest price since August 2022.

Experts predict that prices will remain high for the rest of the year.

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Chancellor Karl Nehammer mistakenly used a picture featuring the Russian currency in his party’s PR campaign

Austrian Chancellor Karl Nehammer became the target of online jokes this week following an X (formerly Twitter) post promoting his party’s ‘Believe in Austria’ PR campaign that featured an image of Russian rubles instead of euros.

According to local media reports, Nehammer published a post on his social media account on Tuesday that enumerated Austria’s many achievements as a leading European economy.

One of the banners was dedicated to Austria’s fight against inflation and proudly declared that the country holds “second place in terms of anti-inflation measures in the EU.” However, eagle-eyed users quickly spotted that the image behind the caption, which featured a family of three throwing coins into a piggy bank, showed Russian rubles instead of euros.

A quick search showed that the image used for the banner was taken from an online photo stock. Apart from the photographer’s clearly Russian name, Evgeny Atamanenko, the photo’s location is listed as being Russia.

The embarrassing mistake reportedly caused many a joke in the comments to the post, with one of Nehammer’s followers suggesting that the ruble looked more appropriate than the single European currency in a post about fighting inflation.

READ MORE: Russia has lowest inflation in Europe – PM

However, the post, along with the juicy comments, was quickly removed from the chancellor’s X feed. There are also no traces of the image on other social networks of Nehammer’s Austrian People’s Party. Reports claim that one of his social media accounts has since published an image of a piggy bank, but with a woman putting euros in it.

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Scheduled maintenance on the Power of Siberia pipeline has been completed, Gazprom has announced

Russian energy giant Gazprom announced on Thursday the restart of natural gas deliveries to China following the completion of regular maintenance on the Power of Siberia pipeline.

“Scheduled maintenance work on the Power of Siberia gas pipeline has been finished,” the company said in a statement released via its Telegram channel. “Gas transportation, as planned, has been resumed today.”

Gas shipments through the pipeline were temporarily halted on September 21. Under the terms of the contract, the route is closed for inspection twice a year, in the spring and autumn.

Gazprom started pumping gas to China via the 3,000km (1,864-mile) pipeline in 2019 as part of a 30-year deal with China National Petroleum Corporation (CNPC). The $400-billion deal was Gazprom’s largest ever agreement.

The capacity of the Power of Siberia, also known as the eastern route, is 61 billion cubic meters of gas per year, including 38 billion cubic meters for export.

READ MORE: Chinese imports of Russian gas soar

Last year, Russia exported 15.5 billion cubic meters of gas to China via the pipeline. According to Deputy Prime Minister Aleksandr Novak, gas supplies to China via the pipeline will reach 22 billion cubic meters in 2023, as Moscow continues to boost energy cooperation with Beijing. Gazprom has been gradually increasing gas flows via the eastern route since the beginning of the year, when Moscow and Beijing signed an agreement for additional supplies.

The two countries are also working on the Power of Siberia 2 energy project, which involves the construction of an additional gas route to China through Mongolia.

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