Western sanctions are hitting Russia’s oil revenues hard. According to the IEA, the International Energy Agency, they have been falling sharply for a year.
Oil exports brought Russia $11.6 billion in February, down 42% year on year, according to the IEA. However, the level of crude exports has not dropped. Russia continues to export by sea as much oil as before Western sanctions. The oil, which before the sanctions was destined for Western countries, is almost exclusively directed to Asian countries with discounts, in particular to India and China.
Russian black gold represented around 40% of Indian imports and 20% of Chinese imports in February. This loss of income corresponds to the scenario desired by the G7 countries, Australia and the European Union. In order to limit Moscow’s income to finance the conflict in Ukraine, these countries have capped the price of a Russian barrel transported by sea at 60 dollars, well below the market price…
However, this price is still higher than the cost of producing oil in Russia. The goal is to allow Moscow to continue to sell its crude and thus avoid the risk of shortage on the world market with, as a consequence, a surge in prices. The question posed by the International Energy Agency is how Russia will meet rising global demand this year.
The IEA predicts record demand of 102 million barrels per day, up 2 million from last year. An increase in needs linked to the resumption of air traffic which is approaching pre-pandemic levels and Chinese demand.