Overlooked vulnerabilities

Craig Kennedy, a member of the advisory board at Harvard’s Davis Center for Russian and Eurasian studies, has posted a long read on sanctions against Russia’s oil sector, Russian Oil’s Achilles Heel.

It’s the best I’ve read on the subject. I haven’t checked all the little details and numbers but Kennedy’s principal points are well founded as far as I can judge using my knowledge of the matter.

The article is still a working draft so readers have a chance to point out errors at this stage. It has great value thanks to its comprehensive scope, including the Russian oil-tax system and the state of its upstream sector.

However, some conclusions seem farther-reaching than recent experience warrants. For example, the 2020 OPEC+ cut showed that the Russian oil industry was able to cope with a temporary shutdown of some 2 mmbpd of crude production. It’s far from the 6 mmbpd at risk in Kennedy’s piece; still, my point is, the system could turn out more flexible than expected. After all, E&P is probably one of the best-run sectors in the Russian economy.

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