BY NICK MORDOWANEC ON 12/27/22 AT 1:27 PM EST
Russia's Deputy Prime Minister Andrei Belousov, left, attends the 29th APEC Economic Leaders Meeting during the Asia-Pacific Economic Cooperation summit in Bangkok on November 19. Russian President Vladimir Putin, right, delivers a speech during the Informal Summit of the Commonwealth of Independent States on December 26 in Saint Petersburg, Russia. Belousov on Tuesday announced an expected Russian budget deficit for 2023.
JACK TAYLOR/POOL/AFP VIA GETTY IMAGES; CONTRIBUTOR/GETTY IMAGES
Russia's 2023 budget will impose
financial challenges amid a deficit, First Deputy Prime
Minister Andrei Belousov said Tuesday.
The deficit is due to both the war in Ukraine,
now entering its 11th month, and the sanctions imposed by the United States and
other Western pro-Ukraine countries.
Top Russian
officials expressed concern in June due
to sanctions. The Institute of International Finance, a banking
lobby group, predicted then that Russia's economy would shrink 15 percent by
year's end and an additional 3 percent in 2023.
"The next year will be rather tough for
us in terms of finance," Belousov told the Rossiya-24 TV network.
"That is, we set the deficit budget for the next year; we understand
amounts of borrowing.
"All of that was agreed with the Bank of
Russia, and this task, this financial framework—it exists, and [it] exists in a
fairly rigid format. This rigid format anticipates strict prioritization of
expenses and projects," he added.
An oil price cap imposed December
5 by the Group of Seven (G7) countries, in cohesion with
the European Union and Australia, is also reportedly
causing an economic pinch due to lack of export income.
Finance Minister Anton
Siluanov said Tuesday that Russia's budget deficit could actually exceed the predicted 2
percent, Reuters reported, imposing additional financial uncertainty
amid continued costs spent toward military operations against Ukraine.
"Is a bigger budget deficit possible? It
is possible, if revenues are lower than planned," Siluanov told reporters.
"What are the risks next year? Price risks and restrictions."
He also alluded to changing macroeconomic
conditions, citing rising inflation and more resources required to support
Russian families.
Ora John Reuter, an
associate political science professor at the University of Wisconsin-Milwaukee,
told Newsweek that Siluanov's comments are showing a
major impact of the sanctions imposed on Russia.
"This is significant because the Russian
government has hitherto denied that the oil price cap would have a major effect
on revenue," Reuter said. "The admission also adds to growing
evidence that the oil price cap could be one of the more impactful sanction
measures imposed by the West thus far."
RIA Novosti reported last week that Russian Deputy Prime Minister Alexander Novak said Russia may cut oil output by 500,000 to 700,000 barrels per day—or about 5 to 7 percent of its total oil production.
"Under the terms
of the decree, there is a ban on supplying oil and oil products to the
countries and entities that demand compliance with the price cap introduced by
the EU,"
Novak said.
Nicholas Farr, emerging Europe economist at
Capital Economics, told CNBC that it may be "too early to fully assess the
impact" of the oil price cap that went into effect earlier this month.
However, he said signs suggest that Russia's
economy "is starting to feel the pinch."
"High-frequency data show that Russian
oil exports have fallen since the sanctions were introduced and the spread
between Brent crude oil prices over Urals oil prices widened to a six-month
high [last] week," Farr said.
Newsweek reached out to the Russian Federation
and to the EU for comment.
Update 12/27/22, 4:09 p.m. ET:
This story was updated with comment from Professor Ora John Reuter.
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