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Russia’s lost oil revenues, gold mine for shipping and refining

8 February 2023

Western sanctions imposed on Russia have significantly reduced the state’s oil revenues and redirected tens of billions of dollars to shipping and refining companies, some of which have ties to Russia, a Reuters analysis shows.

Most of the winners from the sanctions imposed on Russia are companies based in China, India, Greece and the United Arab Emirates, according to several sources in the trading and banking industry. Some of these companies are partially owned by Russian companies.

None of these companies violates the sanctions, the sources pointed out, but they benefited from the measures designed by the European Union and the US to reduce the income available to the President of Russia, Vladimir Putin, to finance the war in Ukraine.

Putin has warned the West that the sanctions will lead to an increase in energy prices. Instead, the price of a barrel of Brent crude fell to 80 dollars, from a level of 139 dollars in March 2022, a few weeks after the start of the war in Ukraine.

Comparatively, before the invasion of Ukraine, the barrel of Brent crude traded somewhere between 65 and 85 dollars.

In parallel, after the group of highly industrialized states imposed a price ceiling for Russian crude oil in December 2022, Moscow’s revenues from oil exports fell by 40% on an annual basis in January 2023, the Russian Ministry of Finances says, according to Agerpres.

“A lower official oil price means that the Russian state budget has suffered in recent weeks,” says Sergey Vakulenko, an analyst at the Carnegie Endowment for International Peace.

Vakulenko was formerly the director of strategy at Russian energy giant Gazprom Neft, but left the company and left Russia after the war began.

“Judging by the customs data, part of the benefits were captured by refining companies from India and China, but the main beneficiaries must be the companies dealing with oil shipping, intermediaries and Russian oil companies,” added Vakulenko.

Sanctions imposed on Russia include an embargo on the purchase of Russian energy by US and EU firms, as well as a ban on the delivery of Russian oil anywhere in the world unless it is sold for less than $60 per barrel.

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