Russian oil revenue has risen by 50 percent since the beginning of the year, despite sanctions aimed at punishing the country for its recent and ongoing invasion of Ukraine, according to a new report by the International Energy Agency (IEA).
In its most recent monthly market report, the IEA said that the Russian Federation had earned about $20 billion per month in 2022, amounting to about 8 million barrels per day.
Notably, the European bloc as a whole remained the largest customer for Russian fuels in the last month, accounting for about 43 percent of Russian oil exports in the most recent month. However, this is liable to change if the European Union presses forward with a proposed embargo of Russian oil, placing Russia under the gun to find other buyers for its surplus.
Last March, economist Elena Ribakova noted a paradox of fossil fuel sanctions: In theory, imposing sanctions on one of the world’s leading exporters of natural gas and petroleum would cause scarcity of these fuels, resulting in higher prices. Ironically, these higher prices present an opportunity to collect higher revenues, rendering the sanctions counterproductive.
“10$ on oil price gives Russia [about] $20 [billion] of current account inflows per year. With imports collapsing[,] Russia’s 2022 current account could exceed $200 [billion],” noted Ribakova via a Twitter on March 9.
For the Russian Federation to profit from this dynamic, it is necessary to find sufficient buyers to compensate for the loss of European markets.
While China has not shied away from accepting Russian fuel imports since the escalation of the war in Ukraine last February, demand is currently at lower-than-normal levels within the People’s Republic of China on account of the harsh CCP (Chinese Communist Party) virus lockdowns throughout the country.
Consequently, much of Russia’s surplus fuel has found a home in India, which has seen a notable increase in deliveries of Russian oil since the beginning of the invasion.
At the same time, an attempted European Union embargo on Russian oil has stalled in the face of opposition from two EU members most dependent on Russian fuels. The European Commission has proposed a six-month phasing out of Russian oil imports to the EU, but Hungary and Slovakia have both requested exemptions from the policy, claiming that cutting off Russian oil impacts will have a deleterious effect on the two Central European economies.