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Russia’s fossil fuel earnings fall in December

European countries have been scrambling to find alternative sources of oil and gas following Russia’s invasion of Ukraine in February 2021.

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According to a new report, Russia’s fossil fuel export revenues fell in December, significantly hampering President Vladimir Putin’s ability to finance the war in Ukraine.

The findings, Ukrainian officials and activists say, illustrate the effectiveness of targeting Russia’s oil revenues and underscore the urgent need for Western policymakers to step up financial pressure on Moscow to help Kiev win.

A report released Wednesday by the Center for Energy and Clean Air Research, an independent Finnish think tank, said the first month of the European Union’s ban on Russian offshore crude oil imports and the G-7 price cap cost Moscow about 160 million euros. ($171.8 million) per day.

The CREA report said Western measures were largely responsible for a 17 percent drop in Russia’s fossil fuel export earnings in the last month of 2022. That means Russia — one of the world’s largest oil producers and exporters — saw a drop in fossil fuel export earnings. fuel to the lowest level since Putin launched his invasion of Ukraine in late February.

“The EU oil ban and oil price cap have finally come into effect and the impact is as significant as expected,” Lauri Millivirta, lead analyst at CREA, said in a statement.

“This shows that we have the tools to help Ukraine defeat Russian aggression. It is essential to lower the price ceiling to a level that does not allow the Kremlin to make taxable profits from oil and to limit the import of the remaining oil and gas from Russia,” Milivirta said.

On December 5, the G-7, Australia and the EU implemented a cap on the price of Russian oil at $60 per barrel. This followed a move by the EU and Great Britain to impose a ban on maritime imports of Russian crude oil.

Together, the measures represented by far the most significant step toward reducing fossil fuel export revenues that fund the Kremlin’s assault on Ukraine.

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

Mikhail Klimentiev | Afp | Getty Images

Energy analysts have been skeptical about the impact of price caps on Russian oil, particularly as Moscow has managed to divert much of its European shipping to China, India and Turkey.

Russia retaliated against the Western measures late last month by banning oil sales to countries that adhere to the price ceiling.

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

‘Financial bloodline for Putin’s war’

Oleg Ustenko, an economic adviser to Ukrainian President Volodymyr Zelensky, said on Wednesday that while it is “very good news” that Russia is losing fossil fuel export revenues as a result of Western measures, they are “definitely not enough”.

Ustenko echoed Zelensky’s calls for the price cap to be set at a much lower level, telling the briefing that any escalation of economic sanctions against the Kremlin should lead to a drop in oil prices to a target range of $20 to $30 a barrel.

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

“The EU and the G7 have the power and all the means to cut this bloodline.” Only power and money speak to the Kremlin.”

Svitlana Romanko

Founder and director Razom Ve Stand

The CREA report said the measures caused a drop in Russian oil shipments and prices, reducing the country’s export earnings by 180 million euros a day.

By increasing exports of refined petroleum products to the EU and the rest of the world, the report said Moscow was able to recoup 20 million euros a day, resulting in a net daily loss of 160 million euros since the Western measures took effect. .

Russia still earns about 640 million euros a day from fossil fuel exports, according to the report.

“The first month of the embargo proves what we have been saying since the beginning of the invasion: revenue from fossil fuel exports is the financial bloodline for Putin’s war,” said Svitlana Romanko, founder and director of the Ukrainian human rights group Razom Ve. Stand (Together Ve Stand).

“The EU and the G7 have the power and all the means to cut this bloodline,” she added. “Only power and money speak for the Kremlin.”

Romanko called on the price cap coalition to lower the price ceiling, strengthen embargo enforcement and introduce additional sanctions to close loopholes.

The CREA report said lowering the oil price ceiling vis-a-vis Russia to between $25 and $30 a barrel, a range that remains “well above” production and transportation costs, would reduce oil export revenues from Russia for at least 100 million euros per day.

It said the Western price cap coalition boasted “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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