bne IntelliNews – Russian energy export revenue rose 40% in May despite sanctions, study finds
Russia’s revenue from energy exports in the first 100 days of the war amounted to 93 billion euros, according to a study by CREA and the EU remains the largest buyer of Russian gas and oil , even after the implementation of the sixth package of sanctions which targets energy.
Despite the West’s efforts to phase out Russian energy imports and starve the Kremlin of revenue to fund its war in Ukraine, the country’s export earnings actually rose nearly 40% year-on-year in May, in due to soaring global prices, data released by the Helsinki-based Center for Energy and Clean Energy Research (CREA).
The EU is making concerted efforts to sever energy ties with Russia following its actions in Ukraine, having already banned coal imports from the country and agreed to an embargo of up to 90% of Ukraine’s oil supplies. here the end of the year. Although reluctant to take similar action on Russian gas, the European Commission is calling on member states to drastically reduce gas use and increase imports from alternative suppliers under the REpowerEU plan, which it says , could lead to a two-thirds reduction in Russian gas. deliveries to the block by the end of the year.
However, the CREA report makes it clear how much money the EU continues to pay Moscow in return for meeting its energy needs. Of the total €93 billion ($97 billion) the country earned from fossil fuel exports, the EU accounted for €57 billion, or 61%. The bloc contributed 85% of Russia’s revenue from pipeline gas exports, 75% of its revenue from petroleum product sales, 75% from LNG, 50% from crude oil and 30% from coal.
Russia’s energy imports were significantly affected in May by disruptions and steep discounts on its crude oil exports, as well as reduced gas supply volumes, following Gazprom’s decision to cut power. supplying nine buyers in Bulgaria, Denmark, Finland, Germany and the Netherlands. and Poland. These countries had refused to comply with a Kremlin decree that required them to make their payments denominated in euros and US dollars to accounts opened at Gazprombank, to be converted into rubles before transferring them to Gazprom.
Nevertheless, Russia’s hydrocarbon export earnings increased by almost 40% year-on-year in May to reach 883 million euros in May. That was 43 million euros more than Russia is estimated to be spending on its war in Ukraine.
The reduction in volumes reduced Russia’s daily revenue by 95 million euros, and the discount on Russian oil erased another 95 million euros. But these factors were more than offset by the 443 million euro growth in revenues resulting from the increase in hydrocarbon prices. Revenue was down from an average of 1.1 billion euros per day in January and February, although seasonality was a major cause of the drop.
On a country-by-country basis, the largest declines in Russia’s revenue stream were made by Poland and the United States. In percentage terms, strong reductions were also achieved by Lithuania, Finland and Estonia.
Other buyers step in
China notably replaced Germany as the biggest buyer of Russian hydrocarbons during the 100-day period, importing a total of 12.6 billion euros. While Chinese purchases remained at a relatively constant level during the war, Germany was able to reduce its crude imports from Russia by 25%.
China, India, France, the United Arab Emirates and Saudi Arabia also took advantage of the discount on Russian oil and increased their purchases. India has become a major buyer, accounting for 18% of the country’s crude exports. The biggest buyer was the Jamnagar refinery, which got 27% of its oil from Russia in May, up from less than 5% before April. Russian imports have mostly replaced arrivals from other sources in India, but the country has also seen an increase in overall crude consumption since early April, according to the report.
Most of this oil is re-exported as a petroleum product. This represents half of the petroleum products that the Jamnagar refinery produces in total.
CREA stressed the importance of targeting the transport of Russian oil to prevent the country from simply diverting its oil to other markets.
“As Russian oil is increasingly shipped to markets further afield, more tanker capacity than ever before is needed,” CREA said. “This is a key vulnerability – tough sanctions against tankers carrying Russian crude would significantly limit opportunities for this type of Russian export rerouting.”
In April-May, CREA estimated that 68% of the oil exported by Russia was on board vessels belonging to European, British and Norwegian companies. Greek tankers alone transported 43% of the total. 97% of tankers were insured in just three countries: the UK, Norway and Sweden.
In its policy recommendations, the CREA called for the sanctioning of any involvement in the transport of Russian hydrocarbons to third parties and the introduction of tariffs on imports of Russian oil when they cannot be removed immediately.
“Sufficiently high tariffs would encourage buyers to avoid buying from Russia whenever possible and limit the price paid to Russian suppliers in spot markets,” CREA said.
CREA also called for a plan to replace Russian fossil fuels with cleaner energy sources, and to implement additional energy efficiency and energy saving measures.