Record oil exports, Russia “turns upstream” of sanctions

Despite predictions of the decline of the Russian economy, almost two months after President Vladimir Putin launched the military campaign in Ukraine, Russia’s oil exports to Europe and countries like India and Turkey have actually increased and the Russian financial sector has so far avoided a liquidity crisis. – Foreign Policy newspaper said.

According to experts, sanctions can be effective in the long run, but right now, it is the countries that are sanctioning Russia that are actively increasing their energy purchases from Moscow – in some cases, in large quantities. more in April than in March.

Oil exports reach record speed

“President Putin continues to earn at least $1 billion a day from oil and gas sales, and the majority of the market is from Europe,” said Edward Fishman, a former Europe expert at the US State Department. . Individual European countries sending military support to Ukraine on the one hand are spending huge sums of money to buy it Russian oil and gas“.

Despite Western restrictions on Moscow’s financial sector, Russia’s oil exports amounted to 3.6 million bpd in April, said Matt Smith of Kpler, which tracks oil tankers. , compared with 3.3 million bpd in March. “The bottom line is that Russia’s crude oil exports this month are actually higher than they were last month. It’s amazing,” Smith said.

Or as experts from the Institute of International Finance (IIF) said in a report this week, Russia’s oil exports are hitting a “record speed” in April. Even selling oil at a discounted price With a large discount, revenue from this activity is likely to be significantly higher than in the same period last year.

Those revenues have pushed Russia’s current account surplus to new highs. In the first three months of the year, that amounted to $60 billion, compared with $120 billion for all of 2021, providing the Kremlin with new revenue to fight sanctions. Russia is the world’s third-largest crude oil producer, after the United States and Saudi Arabia.

For many European countries, natural gas is even harder to cut than oil, as it tends to be traded in long-term contracts through fixed pipelines and is not as renewable as oil. . Although Germany does not approve the pipeline Nord Stream 2 new from Russia, most of Russian gas continues to flow into Europe as before. Currently, alternative supplies of liquefied natural gas, which can be shipped by sea, are still limited, especially in Central and Eastern Europe.

The Executive Committee of the European Union (EU) has outlined a plan to cut Russia’s gas imports by two-thirds by the end of 2022, but that plan remains vague, and many experts say it is not feasible. exam. The plan was also met with stiff resistance, especially in Germany, Russia’s biggest gas consumer, amounting to a third of Germany’s total annual use.

For now, however, Russia’s sales numbers are telling a very different story – one that shows the truly divided and uncertain international response, as well as the heavily discounted Russian crude prices. How to lead at a time of rising energy prices and pervasive inflation nearly everywhere. Nowhere is that more true than in the energy markets. According to the latest data, Russia’s crude oil exports spiked in the first few weeks of April – with India, Turkey and Italy buying more and the rest of the EU pretty flat. While the US, UK, Australia and Canada have completely banned Russian oil imports, most European countries, led by Germany, have continued to buy.

India is the country with the largest increase in buying. Taking advantage of major Russian price cuts, India has imported 17 million barrels of Urals crude from Russia in the past two months alone, compared with 12 million barrels for the whole of last year, Kpler expert Smith said. In the past, New Delhi bought most of its oil from Middle Eastern and Nigerian producers, but now they are getting huge discounts from Russia.

However, India’s purchasing volume is still lower than Europe’s. According to Mr. Smith, Turkey increased its oil imports from Russia from 200,000 bpd in March to 300,000 bpd in April. Italy is also importing more Russian crude this month, from 100,000 to 300,000 bpd. day.

Payment in rubles

Russia has also sought to establish a powerful – and unimpeded – new banking center in Gazprombank, the bank of Russian energy giant Gazprom. Moscow is pressuring European countries and others to pay payments in dollars to Gazprombank and receive rubles in return.

And thanks to the ingenuity of the Governor of the Central Bank of Russia Elvira Nabiullina, who increased the rate and imposed currency controls to prevent Russians from withdrawing money from the country, the exchange rate of ruble It’s back as it was in February.

The Russian government has also imposed export regulations, requiring that 80% of hard currency from exports be sold through authorized banks, especially Gazprombank.

International company still operating in Russia

While there are doubts about how many international companies have committed to pulling out of Russia, a number of large US companies such as International Paper and Koch Industries continue to operate there, as do a host of European corporations. , India and China, including German steel giant Thyssenkrupp. Overall, around 400 multinationals continue to do business in Russia, although some say they are delaying future planned investment, development and marketing or cutting back somewhat. work.