EDITOR'S NOTE: Russia’s economy may have been severed from the western world following its invasion of Ukraine, but its export activity since the invasion has nevertheless proven to be rather profitable. While a good chunk of Europe relies on the energy supply that Russia has largely cut off, Russia’s revenues since the invasion total to around $158 billion from energy exports sold to allies and other neutral countries. Meanwhile, Europe’s stuck eating bitter; the consequences of its own sanction activity served in the form of an energy crisis. To make matters more favorable to Russia, the ban on its oil created a shortage that pushed up energy prices overall, making Russia’s energy sales even more profitable. And while, the US dollar continues to lose purchasing power, Russia and its BRICS allies have created an alternative reserve currency to dethrone the US dollar’s hegemonic status; accumulating gold to position its new currency with an element of monetary substance and trust that far surpasses what the dollar can offer (something about faith in full credit of the United States?).
Of the 158 billion euros ($157.6 billion) in energy exports that Russia has earned in the past six months, over half of it has been funded by the European Union, according to a report released on Tuesday by a Finnish-based think tank.
The think tank’s data shows that the European Union was the top importer of Russian fossil fuels since the invasion, accounting for over 85 billion euros during that period. The organization puts China’s contribution at just under 35 billion euros, and Turkey’s at nearly 11 billion euros.
"Fossil fuel exports have contributed approximately 43 billion euros to Russia's federal budget since the start of the invasion, helping fund war crimes in Ukraine," the Centre for Research on Energy and Clean Air (CREA) said.
CREA, which keeps a running ticker on money the EU is paying for Russian energy, is calling for more effective sanctions, noting that Russia’s “current revenue is far above previous years’ level, despite the reductions in this year’s export volumes”.
While Russia’s exports are down 18% (as of August 24th) compared with a record level in February and March, with piped gas, oil product and coal exports all down, it’s not enough, says CREA, which notes that “only a small fraction of the coming impact of the EU ban on Russian oil has been realised”.
The think tank notes that moves to shut out Russian coal from Europe have been effective, leaving Moscow with no alternative buyers that could fully replace the losses.
However, the gradual ban on Russian oil is simply allowing Moscow to take advantage of soaring crude prices, CREA suggests. At the same time, the organization notes that no restrictions have been set on Russian natural gas. Instead, Moscow holds all the cards here over a highly dependent Europe that is at this moment grappling with the most recent move by the Kremlin to cut flows through Nord Stream 1 to Germany.
By Charles Kennedy for Oilprice.com
Originally published on Oilprice.com.