NV’s probe into Russia’s ingenious oil sanction evasion
Despite the G7 and EU’s imposition of a $60 per barrel price ceiling on Russian oil, the Kremlin continues to roll in the petrodollars, highlighting Moscow’s adeptness at navigating financial restrictions tied to its critical budgetary reliance on oil, experts told NV.
In a collaborative effort with the Kyiv School of Economics (KSE), economist Maxym Myronov conducted a study on the export of Russian oil (Urals brand) and petroleum products at the start of the year.
The research revealed a significant decrease of $15.6 billion in the first quarter of 2023, constituting 40% of the overall decline in Russian exports. Concurrently, Russia experienced a 47% reduction in budget revenues from hydrocarbons compared to the previous quarter.
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In Europe, a sharp decline in demand led to a substantial drop in Urals prices by $20-$25 per barrel, plummeting to $50-$55. Yet, in regions where Russian oil remains in demand, such as exports from Pacific Ocean ports and pipelines to China, the reduction is more modest, with Urals prices only dipping by $10 per barrel to $60-$65, indicating a relatively minor discount.
“Our findings indicate violations of the price limit and emphasize the urgent need for stricter legal enforcement,” says Myronov.
He provides an example of export prices in Russia’s strategically important Pacific port of Kozmino – in the first quarter of this year, they were approximately $75 per barrel.
“At the same time, 96% of the sales exceeded the threshold of $60,” adds the expert.
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The so-called “shadow fleet,” a term coined by Western media to describe hundreds of registered tankers involved in “gray” oil exports, is contested by Andriy Klymenko, head of the Institute of Strategic Black Sea Studies.
Presenting data for September, he asserts that 51% of vessels transporting Urals from Russian Black Sea ports were owned by entities in Greece and Cyprus, 18% by Russian entities registered in UAE subsidiaries, 17% by Turkish companies, and 14% by firms in Liberia, Vietnam, Indonesia, and Singapore, challenging the notion of secrecy surrounding these operations.
However, the “shadow fleet” turned out not entirely shadowy, said Klymenko.
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“The ideologists of the ‘price ceiling’ are just looking for ways to explain to the world their own failure, which has allowed Russia to still has a mechanism for financing the war against Ukraine.”
In August, Russia’s oil export revenues surged to $17.1 billion, the International Energy Agency (IEA) reported, marking the highest level since October 2022 when Russian exports reached $17.3 billion.
The Kremlin may pin hopes on the recovery of oil exports, which will help fulfill the annual revenue plan. Even all other types of EU and G7 sanctions won’t prevent the Russian economy from remaining operational for some time, albeit in a truncated, military-railroaded form.
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