Russia between forced price cuts and circumvention

Sanctions on Russian oil and petroleum products (crude on Dec. 5, 2022, then refined on Feb. 5, 2023) may not win the war, but they will severely dent financial support for Russian efforts. That is at least the hope of the Western Chancellery, which has tentatively expressed satisfaction with what the first plan has achieved. « Russian Crude Oil Price Embargo and Cap [par l’Union européenne (UE)] worked, judging a european diplomat. It didn’t cause panic in the market because it didn’t remove 2-3 million Russian barrels per day from the market. But Russia’s revenues fell. this is our target. »

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Oil remains Russia’s main source of revenue, ahead of gas. Before the invasion of Ukraine on February 24, 2022, Moscow was the second largest exporter of crude oil in the world, and if we add refined products, Moscow was the largest exporter of crude oil in the world. However, due to the first sanctions, its sales will hit 12.6 billion dollars (11.7 billion euros) by December 2022, the lowest since 2021, according to the International Energy Agency.

European Commission President Ursula von der Leyen, in Kyiv on Thursday, February 2, said the first round of oil sanctions had cost “About 160 million euros per day” to Russia. On January 18, Russia’s finance minister also confirmed that sovereign fund revenues, which consist of oil revenues, fell by $38.1 billion in one month to $148.4 billion. at 1Well January. The fund is crucial to Russia’s finances. Originally intended to pay for the pension system, it makes it possible to absorb the largely conflict-related public deficit in December 2022.

“Looking for new buyers”

“In our view, a ban on imports of refined products should have the same type of impact as a ban on imports of crude oil ’, predicts Lauri Myllyvirta, an expert at the Center for Energy and Clean Air Research. To know “Initial volumes fell, which then forced Russian exporters to lower prices to find new buyers”According to the expert, Russia, which is more dependent on Europe for the sale of such products than oil, risks an even bigger blow to its wallet.

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“We estimate the import value of Russian oil products Revenues in the EU currently amount to 70 million euros per day, which is more than 10% of total Russian revenue, or about 600 million euros per day”, he added. Moreover, unlike crude oil, petroleum products are almost exclusively exported from ports in the Baltic and Black Seas, according to the same think tank.

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