The Challenges of the Russia’s Energy Policy during the Covid-19 Crisis

Currently, it is a well-known fact that Russia represents a major player on the global energy market with massive fossil fuel reserves and also with a high dependence on energy exports. While in the recent years Russia was the world’s largest exporter of energy resources, ranking first in the global hierarchy of gas exports, second in oil exports and third in coal exports, the economic growth remained mainly driven by its “energy power”. That proved to be a major vulnerability of Russian economy, especially since its energy sector is still characterized by high corporate concentration and a lack of market mechanisms amid very low domestic prices, a high energy intensity and low efficiency with no real interest from the major stakeholders for the decarbonisations process. As the main development directions outlined in the Russian Energy Strategy 2035 have stated, large state-owned companies depend on government subsidies, and this substantial financial support is all the more vital, especially in the context of the COVID-19 crisis. The “2020 energy crisis” – how it is known in the scientific literature – was mainly triggered by the oil price war between Russia and Saudi Arabia (both being major actors within OPEC+) and proved to have an important negative effect for the Russian energy sector development. Taking into consideration that the pandemic induced the decline of global demand for oil and natural gas, this evolution heavily affected the export volume and revenues of Russian companies. Given the expected prolongation of its reciprocal sanction regime with the West, Russia depends on China's energy demand and financial support. Given all these trends, our paper aims to highlight that the COVID-19 crisis is fundamentally relevant to the Russian energy sector, a sector which is an important sector for the Russian Federation. Our methodology is based both on a quantitative analysis and on highlighting the economic effects, constraints, and “weak points” of the Russian energy sector in the modern realities of the „2020 crisis”.