Vladimir Putin is calling for higher export taxes on Russian oil and is unlikely to give up enough in terms of extraction taxes to truly compensate.

This heaps more structural pressure on the Russian oil group and explains why they may look cheap now: they will always trade cheap as well.

Oil will always be used as a tool of the Russian state to fund increased spending programs.

As it is now, the Russian budget only balances if oil stays at $120 a barrel. That is incredibly high and not what you might call “conservative.”

No analyst out there is pricing oil at that level into their models.

But in the meantime, this is not likely to be friendly to Rosneft or Lukoil  — or their profitability.

Rosneft is tricky for traders in the United States to get into. The ADR is illiquid at best and can even be hard to quote.

But the fact is, oil is such a huge part of the Russian economy that Rosneft accounts for over 9% of the Market Vectors Russia ETF (NYSE:RSX).

Add another 7% allocation to LUKOY, and you are looking at 16% of the entire portfolio being immediately affected by this sudden application of the infamous Putin put.

Written By Tim Seymour From Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.

About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.

Related posts:

1. Look For More Aggressive Spending After Vladimir Putin Loses Ground In Russia (RSX, EEM, VWO)
2. Russian ETFs: The Putin Put Trade Is Back On (RSX, RBL)
3. Trading The Globe: Playing The Putin Put (RSX, VIP, MBT)
4. Russian GDP Looks Vulnerable To External Shocks (RSX)
5. Oil Stress Tests Show Russian Recession Unlikely (BNO, RSX)

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