Oil sanctions are costing Russia 160 million euros – 172 million dollars every day. He reports it Bloombergconfirming the other previous estimate how Russian oil exports had more than halved in the first week of the embargo decided by the European Union and the G7. To be precise, in the week ending December 16, by fifty-four percent, 1.86 million barrels per day: a bang that, again according to Bloomberg, would be due to the lack of tankers willing to transport Putin’s crude oil.
The estimate was reported by Lauri Myllyvirta, chief analyst of the think tanks Finnish Center for Research on Energy and Clean Air (Crea). According to him “the oil embargo decided by the European Union and the maximum limit on the price of oil have finally entered into force and the impact is significant as expected”. Indeed, the forecast of the report is that when on February 5 the limit will have been extended to refined products lost revenues will go up at two hundred and eighty million dollars a day. The research also indicates that following the measures taken by the G7 and the European Union, Russian crude oil is already selling for less than half international prices: at the moment, forty dollars against eighty.
Obviously, the Kremlin denies it. Quoted by Interfax, Putin’s spokesman Dmitry Peskov said it was too early to estimate the impact as the global energy market is too volatile and Russian oil exporters have yet to deal with customers who observe the price cap. Major buyers of Russian crude oil, India, China and Turkey, have not joined the price cap western.
Furthermore, Putin’s decree, published last month and in force since February, prohibits the supply of crude oil and fuels to foreign buyers who respect the threshold in their contracts. Indeed, for example, in December, export volumes to India exceeded one million barrels per day. However, the geographical remoteness of the Chinese and Indian ports increases the cost of transport to alternative markets.
However, Crea recommends tightening the noose even more. Further reduce the limit from twenty-five to thirty-five dollars a barrel – before that it was sixty dollars. It would still be above Russian production and transportation costs, but it would cut the country’s oil export revenue by at least another hundred million euros a day. According to Myllyvirta, “it is essential to lower the price ceiling to a level that negates taxable oil profits in the Kremlin and to limit the remaining imports of oil and gas from Russia”.
According to this analysis, even if the discount on Russian oil could increase dramatically, there is always the possibility that to raise prices and counter a limit that he defines as “illegal” Putin could cut the supply, as he has threatened.
The extension of the discount on thatUrals grade, which is the reference brand for Russian exports, followed the ban that on 5 December the European Union imposed on almost all imports of crude oil by sea from Russia.
At the same time, the bloc has joined the G7 and Australia in imposing a price cap on Russia’s supply. Anyone who wants access to Western services, such as industry-standard insurance, can only do so if they pay sixty dollars or less. And about ninety percent of oil-related services are provided by G7 countries. To get around the problem, tankers are on the rise leaving Russian ports with no clear final destination, so they can presumably transship the crude to other vessels, and hide its origin. But this too raises export prices and reduces profit margins.
According to Crea, Russia has so far shipped crude oil worth 3.1 billion euros on ships covered by the price cap, most of which is taxed by the government. Other measures put in place together with a cap cut, such as stiffer penalties for non-compliance and additional penalties on tanker sales, could reduce fossil fuel revenues by an additional €200m a day.
This will also continue in 2023. Russia’s finance minister said on Tuesday that there would be a two percent of GDP budget deficit for 2023. He assured that this would not limit the war effort, but admitted that the government will have to choose what resources to divert from other sectors to continue it.
Moscow puts on sales | Oil Sanctions Cost Russia 160 Million Euros A Day (Better Continue)