European countries have been scrambling to seek out alternative sources of oil and gas following Russia’s full-scale invasion of Ukraine in Feb. 2021.
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Russia’s revenues from fossil fuel exports collapsed in December, based on a recent report, significantly hampering President Vladimir Putin’s ability to finance the war in Ukraine.
The findings, Ukrainian officials and campaigners say, illustrate the effectiveness of targeting Russia’s oil revenues and underscore the urgent need for Western policymakers to ratchet up the financial pressure on Moscow with a purpose to help Kyiv prevail.
Published Wednesday by the Centre for Research on Energy and Clean Air, an independent Finnish think tank, the report found the primary month of the European Union’s ban on seaborne imports of Russian crude and the G-7’s price cap had cost Moscow an estimated 160 million euros ($171.8 million) per day.
CREA’s report said the Western measures were largely chargeable for a 17% fall in Russia’s earnings from fossil fuel exports in the ultimate month of 2022. It signifies that Russia — certainly one of the world’s top oil producers and exporters — saw revenues from fossil fuel exports slump to their lowest level since Putin launched his full-scale invasion of Ukraine in late February.
“The EU’s oil ban and the oil price cap have finally kicked in and the impact is as significant as expected,” Lauri Myllyvirta, lead analyst at CREA, said in an announcement.
“This shows that we’ve got the tools to assist Ukraine prevail against Russia’s aggression. It’s essential to lower the value cap to a level that denies taxable oil profits to the Kremlin, and to limit the remaining oil and gas imports from Russia,” Myllyvirta said.
The G-7, Australia and the EU implemented a $60-per-barrel price cap on Russian oil on Dec. 5. It got here alongside a move by the EU and U.K. to impose a ban on the seaborne imports of Russian crude oil.
Together, the measures reflected by far essentially the most significant step to curtail the fossil fuel export revenue that’s funding the Kremlin’s onslaught in Ukraine.
Russian President Vladimir Putin attends a gathering on the Kremlin in Moscow on January 6, 2022.
Mikhail Klimentyev | Afp | Getty Images
Energy analysts had been skeptical concerning the impact of a price cap on Russian oil, particularly as Moscow had been capable of reroute much of its European seaborne shipments to the likes of China, India and Turkey.
Russia retaliated to the Western measures late last month by banning oil sales to countries that abide by the value cap.
Kremlin spokesperson Dmitry Peskov has previously said a Western price cap on Russian oil wouldn’t impact its ability to sustain what it describes as its “special military operation” in Ukraine. Peskov also warned the measure would destabilize global energy markets, Reuters reported.
‘Financial bloodline for Putin’s war’
Oleg Ustenko, economic advisor to Ukrainian President Volodymyr Zelenskyy, said Wednesday that while it’s “superb news” that Russia is losing revenue from fossil fuel exports consequently of the Western measures, they were “definitely not enough.”
Ustenko echoed Zelenskyy’s calls for a price cap that is about at a much lower level, saying at a briefing that every escalation of economic sanctions against the Kremlin should see the oil price cap come right down to a goal range of $20 to $30 a barrel.
There may be “no reason to attend and see,” Ustenko said. “It’s already clear.”
“The EU and G7 have the facility and all means to chop this bloodline. Only force and money speak to the Kremlin.”
Svitlana Romanko
Founder and director of Razom We Stand
CREA’s report found that the measures caused a fall in shipment volumes and costs for Russian oil that has cut the country’s export revenues by 180 million euros per day.
By increasing exports of refined oil products to the EU and the remaining of the world, the report said Moscow had been capable of claw back 20 million euros per day, leading to a net day by day lack of 160 million euros because the Western measures got here into force.
Russia still makes an estimated 640 million euros per day from exporting fossil fuels, the report said.
“The primary month of the embargo proves what we have been saying from the start of the invasion: income from exports of fossil fuels is the financial bloodline for Putin’s war,” said Svitlana Romanko, founder and director of Ukrainian human rights group Razom We Stand (Together We Stand).
“The EU and G7 have the facility and all means to chop this bloodline,” she added. “Only force and money speak to the Kremlin.”
Romanko called on the value cap coalition to lower the value limit, strengthen the enforcement of the embargo and introduce additional sanctions to shut loopholes.
CREA’s report says lowering the oil price cap against Russia to between $25 to $30 a barrel, a spread it notes remains to be “well above” production and transport costs, would slash Russia’s oil export revenue by at the very least 100 million euros per day.
It says that the Western price cap coalition boasts “strong leverage” to push down the value caps, adding that “Russia has not found a meaningful alternative to vessels owned and/or insured within the G7 for the transportation of Russian crude and oil products from Baltic and Black Sea ports.”
