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Bold move would deal ‘catastrophic’ blow to Russia’s economy

Hungarian foreign minister defends use of Russian gas and oil

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The West has been urged tighten the screws on Vladimir Putin with a move which could deal a ‘catastrophic’ blow to Russia’s already fragile economy. And Vladyslav Vlasiuk said sanctions are already taking their toll, 10 months after Putin ordered his full-scale invasion of Ukraine.

Mr Vlasiuk, an adviser to Ukraine’s President Volodymyr Zelensky, was speaking days after it was confirmed Russia’s economy’s shrunk by four percent in the third quarter of 2022, meaning it is officially in recession.

He was also commenting in the wake of the G7’s agreement of a price cap of $60 a barrel on purchases of Russian oil on December 3.

Mr Vlasiuk, who is also Deputy Head of the Task Force Ukraine, told Ukraine had by contrast been pushing for a price cap of $35 a barrel.

Speaking via video link and warning the transmission could be interrupted at any time by another air raid, he explained: “This price would mean that Russia will get no more than $150-170 billions in revenue next year for the oil, which would be a catastrophe for its state budget.

“The price of $60 is not a catastrophe – it will be impactful, but not excessive.”

Referring to the sharp dip in Russia’s GDP after figures published by national statistics agency Rosstat last month, Mr Vlasiuk said: “The year before the prediction was that Russia would 10 percent GDP growth.

“And now we have a four percent contraction so this is pretty significant, and we can see that even though their prices for the oil and the gas increase so much, and Russia is making much more money this year for gas and oil.

“It would make roughly $350 billion this year for energy, which is at least $100 billion more than it got the previous year.

“So given all this stuff, we can see the decrease of GDP, we can see the shortage of expenditures on different social and medical care and other areas.

“At the same time there have been the deaths of so many people and so many people left the country and this would also cause a very significant impact on Russia’s economy, although it is not easy to to estimate in numbers.

“We expect this to have a rather significant input as well.”

With Ukraine in the grip of winter, Mr Vlasiuk emphasised the importance of the next few months.

He said: “Every day is crucial for us. The sanctions, the pressure must be must be higher and higher.

“We keep fighting here – every day we have a lot of our people dying in the battlefields.

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“Of course, we prefer not to fight anymore for the next three, four, five, six months but at the same time do we have a choice? No, we don’t.

“Can we stop fighting? No. So we just keep doing what we’re doing, we just keep making our armies more powerful, just keep pressuring Russia with more and more sanctions and trying to find our place in this world.”

Regardless of whether or not Putin was in power, normalising relations between his country and Russia would be highly problematic, Mr Vlasiuk acknowledged.

He said: “A lot of people here in Ukraine just consider Russia as evil country whether, Putin or someone else is the ruler, there is just no difference.

“Russia for us is an aggressive state, a terrorist state. And by the way in the US, they’re almost ready to recognise Russia as a terrorist state, with legal consequences.

“Just a month ago, two months ago, three months ago, nobody would believe that the US will do so.

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“Now this is almost there, nothing is impossible anymore.”

The $60 price cap came into effect on December 5, although it brought with it uncertainty about how much crude could be lost to the world and whether the measures will have a significant impact on the Russian economy.

Chris Weafer, CEO and Russian economy analyst at consulting firm Macro-Advisory, said as things stood, Russia would likely have enough money to not only fund its military but support key industries and social programs.

He added: “At this price level, that outlook really doesn’t change much. But what is key is how much volume Russia would be able to sell.

“And that depends not only on the willingness of Asian buyers to continue buying Russian oil, but also what is the physical ability of Russia to shift that oil.”

Speaking to reporters during a conference call, Kremlin spokesman Dmitry Peskov said: “The economy of the Russian Federation has the necessary potential to fully meet all needs and requirements within the framework of the special military operation, and such measures will not affect this.”

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