Russian oil revenues on a monthly basis now exceed what they were prior to the military operation in Ukraine, according to a new report by Bloomberg on Wednesday. The outlet notes it is a clear sign that the sanctions imposed upon the sector by Moscow have failed.
From April to October, Moscow’s income from crude sales nearly doubled, in spite of international pressure and widespread predictions of huge losses. In October, the net oil revenues of $11.3 billion were responsible for 31 percent of the nation’s overall budget revenues for the month, according to the outlet, which cited Russian Finance Ministry data.
Between January and September of 2023, more than 70 percent of Russian oil cargoes were shipped by domestic vessels, as well as an alleged shadow fleet of tankers, which allowed “Moscow to maintain control over its exports and progressively increase prices,” the article reported.
The Western sanctions packages, which were imposed by the G7 and EU late in 2022, were designed to curtail Moscow’s energy revenues without affecting global supplies or triggering a rise in the price of oil, which was, at the time, skyrocketing and triggering an inflationary crisis in developed nations.
However an unforeseen byproduct of the imposition of sanctions was a reordering of energy supply trade flows and trade relationships, which rendered Moscow relatively immune to such measures as the sanctions, “in a way that some experts say might be hard to reverse at the end of the conflict or after the eventual lifting of the existing sanctions regime,” according to the report.
As a result of the sanctions, Moscow rerouted the majority of its energy exports to Asia, especially India and China, where the purchasers ignored the Western price caps, leading to most of the oil selling well above the capped prices.
Even more, because Moscow sold its energy product at a discount, nations which flouted the price caps, ended up the recipients of ultra-cheap fuel, which benefitted them economically, as the Western nations which abided by the restrictions, suffered inflationary and cost of living crises.
Indian customs data showed that Russian oil sold to the country averaged $72 per barrel this year by the time India received it, which was $12 per barrel over the capped price, which is what the cargoes were declared at, when they were exported from Russia.
So far this year, Russia has shipped almost 3.5 million barrels of crude per day, which translates into about $11 billion going into a delivery spread, according to Bloomberg.
Bloomberg wrote, “Some of that will represent legitimate shipping costs, but almost all of it goes through anonymous traders or unknown shipping companies.”
Eddie Fishman, a senior research scholar at Columbia University’s Center on Global Energy Policy, who helped to craft US sanctions on Iran and Russia, said, “The shadow fleet and alternatives to Western maritime insurance are not new. Iran has used them for years. Now that a massive producer like Russia is using them, they have become more mainstream.”
Although he advocates for stricter controls, he admits that eventually a structural feature of the oil trade will be alternatives to the Western services which were used to attempt to constrain the flow of Russian oil.
