Tankers located in waters near Ceuta, Spain are moving crude oil from Russia to reach Asian markets despite Western sanctions.
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Russia’s oil revenue rebounded in March and April to reach the highest level since November last year, according to a new report, which bolstered the President. Vladimir Putinits ability to finance the Kremlin’s invasion of Ukraine.
Analysis published on Wednesday by the Center for Research in Energy and Clean Air, an independent Finnish think tank, found that Russia’s revenues from oil exports have recovered from the levels reached in January and February.
The findings show that Moscow has recently been able to successfully recover revenue from fossil fuel exports despite the imposition late last year of an import ban from the European Union and a wider G7 oil prices.
It comes less than a week after the G7 leaders SAYS at the end of the Hiroshima Summit in Japan that a cap on the price of petroleum products in Russia worked, Russian revenues decreased and the reduction in the price of oil and gas benefited countries around the world.
This is a clear indication that the implementation is not working.
Lead analyst at the Center for Research in Energy and Clean Air
CREA energy analysts suggested the failure from the so-called Price Cap Coalition to change the price level and implement the policy resulted in the measures “losing traction, integrity and credibility.”
“The EU has failed in its commitment to review the price cap every two months to ensure that it remains lower than the average market price,” said Lauri Myllyvirta, lead analyst at CREA and co-author of the report. .
“This is a clear indication that enforcement is not working,” he added.
A spokesperson for the European Union declined to comment when contacted by CNBC.
Russia’s oil revenue recovery is expected to continue
At the beginning of the year, data SHOW Russia’s income from fossil fuel exports collapsed in December. It appears to have underscored the effectiveness of policymakers targeting Russia’s oil revenues and fueled calls for more drastic measures to help Kyiv win.
The latest CREA findings, however, show that Russia’s oil tax revenues rose 6% month-on-month in April due to an increase in export revenues in March.
To be sure, the revenues of the Kremlin are significantly below the level recorded in April last year, when the price of oil jumped.
An increase in export earnings in March resulted in a 5% month-on-month rebound in Russia’s mineral extraction tax receipts in April, the report said – and a larger that increase is expected in May.
This means that after falling at the beginning of 2023, Russian oil tax revenues have since recovered due to increased sales.
Russian President Vladimir Putin meets with Supreme Court chairman Vyacheslav Lebedev at the Kremlin in Moscow on May 22, 2023.
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“The Kremlin’s tax revenue closely follows Russian crude oil prices, which underlines the importance of the oil price cap. The state has also changed its tax regime to reduce the impact of the price cap,” said Isaac Levi, energy analyst at CREA.
“Unless the price cap coalition acts to lower the price cap level and plug enforcement gaps, changes to Russia’s oil tax structure will put pressure on Russian crude prices which is closer to international standards, which will lead to further recovery of Russian oil revenues and wholesale failure. of the price cap system,” he added.
The CREA analysis says that since the EU’s import ban and the G7 cap on Russian oil prices, Moscow has earned an estimated 58 billion euros ($62.5 billion) in export revenues from seaborne oil.
Most of it is transported by European-insured or owned tankers, it added. Russian revenues could be reduced by an additional 22 billion euros if the crude oil price cap is reduced to $30 per barrel and the price caps for oil products are adjusted accordingly, CREA said.
What is the purpose of the price cap?
The G7, Australia and the EU implemented a $60-per-barrel price cap on Russian oil on December 5. This coincided with a move by the EU and the UK to impose a ban on seaborne imports of Russian crude oil.
Together, the measures are thought to represent the most significant step yet to curb the fossil fuel export revenue that funds Russia’s war in Ukraine.
In February, the Price Cap Coalition followed up on its crude oil price cap by imposing a $100 per barrel price cap on Russian petroleum products such as diesel and a $45 per barrel cap on Russian petroleum products. such as fuel oils that trade at a discount to crude oil. .
The purpose of the price cap policy is to restrict Russian oil revenues while maintaining Russian oil supplies. The US Treasury SAYS in an update last week nearly six months after the implementation of the price cap, the policy achieved both goals.
The Treasury estimates that Russia’s oil revenue has fallen to just 23% of Russia’s budget this year, down from 30% to 35% of Russia’s total budget before Moscow launched its war on Ukraine in February. 2022.
The US said this drop in revenue occurred at a time when Russia exported 10% more crude oil in April 2023 compared to March last year.