- Analysis published Wednesday by the Centre for Research on Energy and Clean Air, an independent Finnish think tank, found that Russia’s revenues from oil exports have recovered from levels reached in January and February.
- The findings show that Moscow has been able to successfully claw back earnings from fossil fuel exports in recent weeks despite the imposition of import bans.
- Energy analysts at CREA suggested the failure from the so-called Price Cap Coalition to revise price levels.
Russia’s oil revenues rebounded in March and April to reach the highest level since November last year, according to a new report, bolstering President Vladimir Putin’s ability to finance the Kremlin’s onslaught in Ukraine.
Major Gaps
“Russia’s export revenue in April was down substantially year-on-year, mainly due to the impact of the EU import ban and lower oil prices. This means that Russia’s budget will likely stay in deficit, constraining military expenses,” said Lauri Myllyvirta, lead analyst at CREA and co-author of the report. “However, Russia was able to export its main crude oil variety, for the first time, at prices that were systematically above the price cap level set by the U.S., EU and allies,” he added, saying this had exposed “major gaps” in the enforcement of the price cap policy. Unless gaps in enforcement are fixed urgently, this risks breaking the price cap mechanism for good. That, in turn, would raise Russia’s expected tax incomes and make the invasion that much easier to sustain.
Recovery Expected
At the start of the year, data showed Russia’s revenue from fossil fuel exports had collapsed in December. It appeared to underscore the effectiveness of policymakers targeting Russia’s oil revenues and sparked calls for even tougher measures to help Kyiv prevail. CREA’s latest findings, however, show that Russia’s oil tax revenues rose 6% month on month in April due to the increase of export revenues in March.
CREA’s analysis said that since the EU’s import bans and the G7 price cap on Russian oil, Moscow has earned an estimated 58 billion euros ($62.5 billion) in export revenues from seaborne oil. The majority of which was transported on European insured or owned tankers, it added. Russia’s revenues could be slashed by a further 22 billion euros if the price cap for crude oil was reduced to $30 per barrel and price caps for oil products were revised accordingly, CREA said.
Aim Of Price Cap
The G7, Australia and the EU implemented a $60 per barrel price cap on Russian oil on Dec. 5. It came alongside a move by the EU and U.K. to impose a ban on the seaborne import of Russian crude oil. Together, the measures were thought to reflect by far the most significant step to curtail the fossil fuel export revenue that is funding Russia’s war in Ukraine.
In February, the Price Cap Coalition followed up its crude oil price cap by imposing a $100 per barrel price limit on Russian petroleum products such as diesel and a $45 per barrel cap on Russian petroleum products such as fuel oils that trade at a discount to crude oil. The Treasury estimates that Russia’s oil revenues have fallen to just 23% of the Russian budget this year, down from 30% to 35% of the total Russian budget before Moscow launched its war in Ukraine in February 2022.
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Source: CNBC
