After Russia’s large-scale intervention in Ukraine in February 2021, European countries began to look for alternative sources of oil and gas.
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Russia’s revenue from fossil fuel exports fell in December, significantly hampering President Vladimir Putin’s ability to finance the war in Ukraine, according to a new report.
Ukrainian officials and campaigners say the findings demonstrate the effectiveness of targeting Russia’s oil revenues and highlight the urgent need for Western policymakers to step up financial pressure on Moscow to help win over Kiev.
The first month of the European Union’s ban on imports of Russian raw materials by sea and the G-7 price cap cost Moscow about $160 million, the Center for Energy and Clean Air Research, an independent Finnish think tank, said in a report on Wednesday. euros ($171.8 million) per day.
CREA’s report says that Western measures caused a 17% drop in Russia’s fossil fuel export revenues in the last month of 2022. This means that Russia, one of the world’s largest oil producers and exporters, has reduced its revenues from fossil fuel exports. It has reached its lowest level since Putin launched a large-scale intervention in Ukraine in late February.
“The EU oil embargo and oil price cap have finally kicked in and the impact is as significant as expected,” said Lauri Myllyvirta, lead analyst at CREA.
“This shows that we have the tools to help Ukraine defeat Russian aggression. It is important to lower the price ceiling to a level that denies the Kremlin taxed oil revenues and limit the remaining oil and gas imports from Russia,” Myllyvirta said. .
The G-7, Australia and the EU imposed a $60/barrel price ceiling on Russian oil on December 5. This came alongside EU and UK bans on seaborne imports of Russian crude oil.
Together, the measures represent the most significant step yet to cut fossil fuel export revenues that fund the Kremlin’s offensive in Ukraine.
Russian President Vladimir Putin attends a meeting at the Kremlin on January 6, 2022 in Moscow.
Mikhail Klimentyev Afp | Getty Images
Energy analysts were skeptical about the impact of the price ban on Russian oil, especially since Moscow is able to divert much of its shipments from Europe by sea to countries such as China, India and Turkey.
Russia responded to Western measures late last month by banning oil sales to countries bound by the price ceiling.
Kremlin spokesman Dmitry Peskov said earlier that the Western price cap on Russian oil would not affect his ability to continue what he described as a “special military operation” in Ukraine. Peskov also warned that the measure would destabilize global energy markets, Reuters reported.
“Financial bloodline for Putin’s war”
Oleg Ustenko, an economic adviser to Ukrainian President Volodymyr Zelensky, said on Wednesday that Russia’s loss of fossil fuel export revenues as a result of Western measures was “very good news”.
Ustenko echoed Zelensky’s calls for a price cap, saying at a briefing that any escalation of economic sanctions against the Kremlin should bring oil prices down to $20-$30 per barrel.
“There is no reason to wait and see,” said Ustenko. “It’s clear now.”
The CREA report noted that the measures caused a drop in Russian oil supply volumes and prices, reducing the country’s export earnings by 180 million euros per day.
By increasing exports of refined petroleum products to the EU and the rest of the world, Moscow was able to recoup 20 million euros a day, resulting in a net loss of 160 million euros a day after Western measures took effect, the report said. .
Russia still earns about 640 million euros a day from fossil fuel exports, the report said.
“The first month of the embargo proves what we have been saying since the beginning of the occupation: the revenue from fossil fuel exports is the financial bloodline for Putin’s war,” said Svitlana Romanko, founder and director of the Ukrainian human rights organization Razom We. Stop (Together We Stand).
“The EU and the G7 have the power and all the means to cut this bloodline,” he said. “Only power and money talk to the Kremlin.”
Romanko called on the price cap coalition to lower the price cap, strengthen embargo enforcement and introduce additional sanctions to close loopholes.
The CREA report said that lowering the oil price threshold against Russia to $25-$30 per barrel, a range it noted would still “higher” production and transportation costs, would reduce Russia’s oil export earnings by at least 100 million euros a day. will reduce
It said the Western price cap coalition had “strong leverage” to lower the price caps, adding that “Russia has not found a meaningful alternative to G7-owned and/or insured ships in the G7 to transport Russian crude and oil products. Baltic and Black Sea ports “.