Kremlin loses $170 million each day in profits due to oil price ceiling – Bloomberg

Veronika Prokhorenko 12:51, 01/11/23

In the future, Moscow’s losses could amount to $280 million in lost profits.

Russia continues to face economic losses amid invasion of Ukraine
Russia continues to face economic losses amid invasion of Ukraine

The Kremlin is suffering huge losses amid sanctions imposed by the G7 (G7) countries and related European Union restrictions on Russian Urals oil: a daily energy price ceiling costs Moscow $172 million. According to Bloomberg , as early as February 5, due to price restrictions on the sale of oil, the Russian Federation will lose up to $280 million in lost profits.

Thanks to economic pressure on the Kremlin, Russian oil is now trading on the market at more than half the world price, according to an analysis by the Helsinki Center for Energy and Clean Air Research (CREA).

“The EU oil ban and oil price caps have finally come into force and their impact has been as significant as expected,” said Lauri Müllivirta, lead analyst at CREA.

The Center believes that in the future the world community should put even more pressure on Moscow. The researchers predicted that if the upper limit of the cost of Russian oil is reduced to 25-35 dollars per barrel from 60 dollars, such a sanction will reduce Russia’s income from oil exports by another 100 million euros daily. Although the profit will still be higher from the costs that Russia will spend on the extraction and transportation of the resource.

What is important now, Mülliwirth said, is to minimize the Kremlin’s ability to profit from oil exports, as well as limit the remaining imports of oil and gas from Russia.

At the same time, one should not exclude the possibility of new attempts at energy blackmail by the Russian Federation, because Moscow is quite capable of arbitrarily reducing supplies in order to once again stir up the market and provoke a jump in oil prices.

As you know, the EU imposed restrictions on almost all marine oil imports from the Russian Federation from December 5, 2022. The block also joined the G7 sanctions by limiting the cost of supplies from Russia: now only those who pay $60 or less can use such a service as standard industry insurance.

So far, Russia has shipped €3.1 billion worth of crude oil on ships that are subject to the price cap, according to CREA. However, additional Western sanctions, such as tougher penalties for non-compliance and additional sanctions on the sale of tankers, could cut Moscow’s fossil fuel export revenue by an additional €200 million a day.

As a reminder, Russia’s federal budget deficit  widened to a record high in December due to falling revenues amid restrictions on oil exports and rising costs of invading Ukraine. The budget deficit reached a record 3.9 trillion rubles ($56 billion) last month. Thus, the deficit for the whole of 2022 amounted to about 3.3 trillion rubles, which led to a reduction in the surplus for 11 months of the year.

Meanwhile, Europeans are nervous about waiting for the second phase of the embargo on Russian oil in February, the situation with fuel is tense. According to Sergey Kuyun, director of the A-95 Consulting Group, against the background of the zeroing of Russian energy imports from Germany, the Poles are now especially “nervous”. 

(C)UNIAN 2023

One comment

  1. Moskali oil and gas have been like narcotics for Europeans the last decade and now they are going through withdrawals. There is a price when you deal with the Devil and Bidenov isn’t helping by restricting American oil and gas. American production would boost the markets and sink Moskovia immediately. .

What is your opinion?