Russia is benefiting from oil and gas exports, despite sweeping Western sanctions over Ukraine’s invasion, thanks to a lucrative cocktail of high prices, rising demand and trade loopholes.
According to Bloomberg, Russia is poised to earn nearly $321 billion from its energy exports this year — more than a third more than last year. In April alone, Russia expects 9.6 billion dollars more from energy sales than originally forecast due to the high prices.
That’s partly because the European Union remains heavily dependent on Russian gas and has so far refused to halt supplies over fears of an energy crisis.
Accordingly, energy export earnings have made Russia a major source of revenue despite escalating sanctions designed to cripple its economy.
“Oil revenues make up a large part of Moscow’s budget. It is an important source of funding for [President Vladimir] Putin’s invasion of Ukraine. Cutting Russia’s oil revenues could hasten an end to the conflict,” American Enterprise Institute-based scholar Michael R. Strain said in a recent blog post.
The European Union is heavily dependent on Russian energy.REUTERS
A worker operates the drilling rig at the Suzunskoye oil field owned by the Rosneft company, north of the Siberian city of Krasnoyarsk.REUTERS
British energy giant Shell PLC – which was widely criticized in the early days of the invasion for buying a shipment of heavily discounted Russian oil – is now selling a so-called “Latvian blend” of diesel to avoid a possible scrutiny, according to Bloomberg.
“Latvian blend” refers to blended diesel where less than 50% of the contents of each barrel comes from Russia, meaning the product is not classified as of Russian origin. Bloomberg reported that Shell recently adjusted its contract terms to allow the use of blended diesel.
Shell did not immediately respond to Post’s request for comment on its apparent use of the so-called “Latvian mix”.
Oil and gas exports are the lifeblood of the Russian economy – they account for about 40% of the country’s annual revenues. So far, the economic sanctions, while severe, have largely left Russia’s energy sector untouched.
The sale of Russian oil and gas remains legal in Europe, although companies can benefit as long as they can tolerate any possible public backlash related to their dealings with the Kremlin.
The continued flow of Russian oil and gas has not escaped the attention of Ukrainian officials, who have been pushing hard for Europe to enact an import ban.
Oleg Ustenko, an economic advisor to Ukrainian President Volodymyr Zelenskyy, said Russia makes $1 billion a day from oil exports – money that is used to fund its invasion.
In April alone, Russia expects $9.6 billion more from energy sales than originally forecast due to high prices.REUTERS
Russian President Vladimir Putin chairs a Security Council meeting via video conference on Thursday, April 7, 2022 at the Novo-Ogaryovo residence outside Moscow, Russia. AP
“There is no doubt that the financial and other sanctions have weakened Russia’s economy and its ability to procure certain materials needed to continue the war in Ukraine,” said Patrick Honohan, senior fellow at the Peterson Institute for International Economics, in a blog post last week.
“But sanctions are not enough to cripple the economy unless they cut off the flow of export revenue that finances the budget and also ensures the continued availability of foreign exchange to pay for needed (and unsanctioned) imports,” he added.
The foreign ministers of Ireland, Lithuania and the Netherlands have said the European Union is considering a Russian oil ban for its next round of sanctions – but a final decision is still pending.
With mail wires