September 25, 2015 by AK
I was puzzled by George Soros’ explanation why Moscow seems unlikely to break the Minsk agreement and launch a large-scale military operation against Ukraine:
The weakness of oil prices and the further downward slide of the ruble have put renewed pressure on the Russian economy. But the decisive factor has been the decline in Russian oil production. Output has been falling year over year, and for the first time, both the quantity and quality of the petroleum output fell this year between the months of June and July.
The problem with this claim is that Russian oil (crude and condensate) output has not been falling year over year lately. The Russian ministry of energy has monthly production and year-over-year growth rates (main page with links to monthly data; e.g. for August 2015) on its site. All the y-o-y growth rates for monthly output have been positive in 2015. Production growth was a meager 0.2% in January but accelerated to 1.6% in May and June and to 2.5% in July before slowing down to 1.5% in August. No decline so far.
Perhaps Soros is seeing a short-term trend that others cannot see. I’ve calculated average daily rates (assuming 7.3 barrels per ton) for January through August: 10.61, 10.62, 10.65, 10.63, 10.66, 10.68, 10.62, 10.65 million barrels per day (mmbpd). September data is not yet available from the ministry, but daily output for at least 12 days in September has been reported. The September average is 10.66 mmbpd, roughly the same as August 2015 and 0.6% above September 2014. Sure, there were days in May 2015 when production exceeded 10.7 mmbpd, but no one should lose sleep over such minor fluctuations.
In other words, I don’t see signs of an imminent decline in Russian oil output right now, judging by the productions statistics alone. Besides, the decline should be obvious and steep enough to have any impact on the Kremlin’s thinking. George Soros also comments:
This means that the sanctions are biting and the lack of spare parts is accelerating the depletion of existing oil fields. …[T]he only way he [Putin] can arrest a general decline of the oil industry is by having some of the Western sanctions lifted.
The sanctions are biting, but not (yet) in the way described above. The remark about the quality of output is also puzzling.