Impact Of Russian Oil Sanctions: A Year Since Ukraine’s Invasion

Impact Of Russian Oil Sanctions: A Year Since Ukraine’s Invasion

February 19, 2023 0 By Wiley McDermott

Nearly a year ago Russia invaded Ukraine since then Russia has suffered greatly on the economic front.

Feb.24 marks one year since Ukraine has been invaded by Russian troops.

As the result, the U.S. has imposed economic sanctions which have halted Russian exports. Russia’s oil exports remain unchanged.

As a result, Europe and other big markets have set their expectations on countries such as Saudi Arabia, Iraq and other Gulf countries.

As a result of the European and U.S. sanctions, the dynamics of the global oil and gas market have been reshaped rampantly.

Russia’s Consumer Base

Data has shown that Russia’s oil exports have declined significantly as it is only supplying to a few countries; China and Netherlands topping that list.

According to data from November 2021, the top two importers of Russia’s oil were China and the Netherlands.

Both of them were accounting for 18% and 15% of the country’s total oil exports, and Russia’s remaining oil was shipped to 24 other countries.

Among these 24 countries, none of the countries accounted for more than 8% of Russia’s oil exports.

As compared to November 2021, the situation in November 2022 was immensely disturbing for Russian oil exports.

In November 2022, Russia exported its oil and gas products to only 11 countries. Indian and China top that list.

India was the new addition to Russia’s supply lines as 38% of Russia’s oil products were exported to India.

China only the other hand contributed to 28% of Russia’s oil exports. As of now, Russia lacks the range of countries to export its oil.

Conversely exporting oil to India and China comes with a drawback as both of these countries can bring the prices down.

Russia’s exports have nearly reduced by 70%. Compared to brent Russia’s oil is already available at a discounted rate.

A Look at Russia’s Energy Revenues

The intention behind implementing sanctions was to maintain a specific volume of Russian oil in circulation.

It was a well-crafted move by the Europe and U.S. to concurrently limit the amount of revenue that Russia could earn from selling oil.

Furthermore, it needs to be understood that Russia is not generating revenues from selling crude oil only. Russia is also offering insurance and shipping services to the world.

Based on Kpler’s analysis, the revenue earned by Russia for its oil, including other charges, could be over $60 per barrel.

According to Reuters Russia is likely to reduce its oil production by 500,000 bpd, next month this year. Amid this news, the price of Brent oil surged monumentally.

Experts do believe that rather than buying Brent oil at expensive rates, China and India will purchase more quantities from Russia at a discounted rate.

According to Goldman Sachs Russian economy is still in an $ 8 billion surplus, despite massive declines in its global oil exports.

Impact of Russian Sanctions on U.S. and Europe

As Russia is out of the equation, Europe has now engaged Saudi Arabia and Iraq to fulfill its energy needs.

Back in July 2022, Europe imported nearly 2.2 million bpd of oil from the gulf countries.

As long as Russia’s matter will remain unresolved, Europe will aim at Middle Eastern countries to fulfill its energy needs.

Talking of the U.S., the country is relying on its reserves and also importing a large quantity of oil from Middle Eastern countries.

However, most recently Europe and the U.S. has seen less demand for gas, the reason being relatively harsh winters.

One of the biggest issues that the U.S. and Europe can face in the future is the availability of natural gas.

As Russia is no longer offering its natural gas, if the coming winter season has seen drastic levels of coldness this would send the gas prices sky high.

Geopolitical and economic experts do believe that it is better for the global economy if Russia and Ukraine resolve their issues as soon as possible.