Fossil fuel revenues decline in Russia in December

European countries are scrambling to find alternative sources of oil and gas in the wake of Russia’s all-out invasion of Ukraine in February 2021.

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Russia’s revenues from fossil fuel exports collapsed in December, according to a new report, significantly hampering President Vladimir Putin’s ability to fund the war in Ukraine.

Ukrainian officials and activists say the findings demonstrate the effectiveness of targeting Russian oil revenues and underscore the urgent need for Western policymakers to increase financial pressure on Moscow in order to help Kyiv prevail.

It was published Wednesday by the Center for Research on Energy and Clean Air, an independent Finnish think tank Report It found that the first month of the EU’s ban on seaborne Russian crude oil imports and the G7 cap cost Moscow an estimated 160 million euros ($171.8 million) per day.

The CREA report said Western actions were largely responsible for a 17% drop in Russia’s earnings from fossil fuel exports in the last month of 2022. This means that Russia – one of the world’s largest oil producers and exporters – has seen a drop in revenue from fossil fuel exports. . to its lowest level since Putin launched his all-out invasion of Ukraine in late February.

“The EU’s oil embargo and cap on oil prices have finally come into effect, and the impact is as large as expected,” said Laurie Mylivirta, senior analyst at CREA, in a statement.

“This shows that we have the tools to help Ukraine prevail against Russian aggression,” Mylivirta said. “It is necessary to lower the price ceiling to a level that would deprive the Kremlin of taxable oil profits, and restrict the remaining oil and gas imports from Russia.” .

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Group of Seven, Australia and the European Union outlet Capping the price of a barrel of Russian oil at $60 on December 5. This came along with a move by the European Union and the United Kingdom to impose a ban on seaborne imports of Russian crude oil.

Together, the measures reflected the most significant move to curtail the fossil fuel export revenues that fund the Kremlin’s offensive in Ukraine.

Russian President Vladimir Putin attends a meeting at the Kremlin in Moscow on January 6, 2022.

Mikhail Klimentiev | Afp | Getty Images

were energy analysts skeptical On the impact of setting a price cap on Russian oil, especially since Moscow has managed to redirect much of its European naval shipments to countries such as China, India and Turkey.

Russia Revenge To Western measures late last month to ban oil sales to countries that adhere to the price ceiling.

Kremlin spokesman Dmitry Peskov said earlier that imposing a Western ceiling on Russian oil prices would not affect its ability to maintain what it describes as its “special military operation” in Ukraine. Peskov also warned that the measure would destabilize global energy markets, Reuters reported.

‘Financial strain of Putin’s war’

Oleg Ustinko, economic adviser to Ukrainian President Volodymyr Zelensky, said Wednesday that while it is “very good news” that Russia is losing revenue from fossil fuel exports as a result of Western measures, it is “certainly not enough.”

Ustinko echoed Zelensky’s calls for a price cap at a much lower level, saying in a nutshell that every escalation of economic sanctions against the Kremlin should result in the oil price cap falling to the target range of $20 to $30 per barrel.

“There is no reason to wait and see,” said Ustinko. “It is already clear.”

“The European Union and the Group of Seven have the power and all the means to cut this bloody streak. Only power and money address the Kremlin.”

Svetlana Romanko

Founder and CEO of Razom We Stand

The CREA report found that the measures caused shipment volumes and Russian oil prices to plummet, slashing the country’s export revenues by €180 million per day.

By increasing exports of refined petroleum products to the European Union and the rest of the world, the report said Moscow managed to recover 20 million euros per day, resulting in a net daily loss of 160 million euros since the Western measures came into effect. .

The report said Russia still earns an estimated 640 million euros per day from fossil fuel exports.

“Together We Stand,” said Svetlana Romanko, founder and director of Ukrainian human rights group Razom We Stand.

“The European Union and the Group of Seven have the power and all the means to cut this bloody streak,” she added. “Only power and money speak to the Kremlin.”

Romanco called on the Price Cap Coalition to lower the price cap, strengthen enforcement of the ban and impose additional penalties to close loopholes.

The CREA report says lowering the ceiling for oil prices against Russia to between $25-$30 a barrel, a range it points to is still “well above” production and transportation costs, would reduce Russia’s oil export revenues by at least €100m. Daily.

It says the Western price cap coalition has “strong leverage” to lower price caps, adding that “Russia has not found a meaningful alternative for G7 owned and/or insured vessels to transport Russian crude and oil products from Baltic and Black Sea ports.”

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