This is CBS. I am the world. I'm John Bachelor. The Russian economy sanctions. What does it actually translate into in order to sustain the war effort and the population and the world demand of Russian energy?

I welcome Michael Bernstom of the Hoover Institution to help me on some of these puzzles. We begin with a puzzle from Bloomberg. Russia needs to show OPEC Plus partners, Rice Bloomberg, that it's slashing oil output is promised or risk sparking a dust up like it did in 2020.

Neither side wants another free for all. If I read correctly in 2020, Russia did not live up to its agreements from 2016. And when oil went below $20 a barrel, everybody was short-changed, but Russia grinningly continued to break its commitments. Michael, what are these commitments that Russia made in 2016 and then re-energized in 2020? Good evening to you.

Good evening to you. OPEC is an organization in which everyone is trying to take advantage of everyone else. It's not a very friendly organization. So now they declared a month ago that in order to bring the price is up on the world market, they need to reduce the output by 1.6 million barrels a day.

Immediately, Saudi Arabia did it. Iraq immediately increased its output to fill the gap. Russia declared that Russia will decrease its output by 500,000 barrels a day and didn't. And Russia is trying to sell more oil while the prices are going down.

And now, of course, the Brent is under $73 per barrel. And the Russians are getting discount of $12 a barrel but selling care everywhere. And this is one level of cheating.

The first level of cheating is that everyone is trying to take advantage of the overall decrease to increase its own production. And the Russians are saying that it is a temporary increase. It is they find an excuse that it is very hard to close down oil wells. And it is some technical problems as the worst one level of cheating.

But for Russia, that's important for the Saudis, important for the world market, the oil flows. And the second level of cheating is the producers themselves because they are not paying taxes. They are avoiding taxes to pay to the Russian government.

They declare that their selling had a huge discount. And they are partying the money through middlemen and traders because those are their own affiliates.

Recently, it is a funny story about the new world now, spoofing that the tankers, the Deliver Russian oil from the Pacific Ocean ports are found elsewhere. There seem to be near Japan, but in actuality, the new Russian ports go to China.

The problem is that the oil that flows there, as for it's not the standard Russian euros oil, as for is is severe and Pacific Ocean, it's not under sanctions. They are not cheating on the sanctions side.

They are cheating on the tax side because they are selling this oil itself premium above the brand. They are selling at 75, 76 dollars a barrel. They are selling at 60 dollars a barrel. Eventually, Russian budget oil revenues are down by 52%.

And so this is the second layer of cheating. They are using the situation with everyone being dishonest by trying to not to pay taxes to the Russian government, which means which is a good news, which means that the Russian government has a few revenues to finance the world.

Now we come to another story about the Russian economy that needs a translation. Russian central bank placed down an impact of foreign company exit. This is Reuters filing in these last days. Only five transactions involving foreign companies selling assets in Russia since October have involved payments to non-residents above 400 million, this according to the bank of Russia.

What is this main Michael that businesses dried up in Russia entirely? Everybody's already gone.

Here's the problem. It's a really serious problem. A foreign company has already lost over 70 billion dollars while trying to exit from Russia under the sanctions and under their own buy-court of Russia during the war.

So there are 14 hundred foreign companies and with affiliates it is about 2000 and they applied 2000 companies applied to the Russian.

The Russian president in March 2022, just as the war started issued a decree executive order in which foreign companies can leave Russia only with the permission of the Russian government. They have to apply.

200 applications were filed, very few were responded. Now there is a new rule that not more than one billion dollars can leave Russia during one month, which means they cannot take the assets down.

Then there was a new rule a few months ago that they can sell their assets to Russian companies only at 50 percent discount.

Whatever happens they lost half of their assets. One way or less. Then if their assets are over a billion dollars, then they have to pay additional 10 percent of the taxes to the Russian government and capital gains and selling their assets.

Although it is capital losses because they are losing 30 percent. So altogether it is a relief of in the Middle Ages there was a concept called quit rent when the president wanted to leave his landlord.

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