Russia is making more money from oil sales than before the war

SEOUL – When the United States and the European Union decide to cut back on Russian fossil fuel purchases this year, they hope it will help make Russia’s invasion of Ukraine economically painful for Moscow. President Vladimir Putin will be forced to abandon it.

At best, that prospect now seems far-fetched.

China and India, the world’s most populous countries, have rushed to buy an equal amount of Russian oil that should have been shipped to the West. Oil prices are so high that Russia now makes more money selling oil than it did before the war started four months ago. And its once cult coin has increased in value against the dollar.

Russian officials are smirking at what they call a spectacular failure to defeat Mr. Putin. And the economic pain caused by the oil boycott has resonated not only in Moscow but also in the West, especially the United States, where oil prices have skyrocketed. poses a potential threat for President Biden less than half a term.

Some argue that the European oil embargo has yet to take effect, and argue that the long-term impact of Russia’s economic boycott during the war remains a strong determinant of the country’s fate. country. Those effects extend far beyond the fossil fuel trade, which hampers Russia’s banking and other industries, but largely the sale of oil and gas has helped Russia’s government – and military they stand firm.

“Things are much better than the worst-case scenario, and maybe even better than the base case,” Yevgeny Nadorshin, chief economist at consulting firm PF Capital in Moscow, said of the company’s energy revenues. Russia. “Unfortunately, the most difficult phase has only just begun.”

Whether Mr Putin now feels financially able to prosecute the war indefinitely is an open question. But there are signs that Ukraine and its supporters are moving further for a protracted conflict.

Iryna Vereshchuk, Ukraine’s deputy prime minister, has issued an urgent appeal to hundreds of thousands of people living in Russian-occupied regions of southern Ukraine to evacuate in the face of a potential Ukrainian counterattack.

And on Tuesday, the Biden administration sent Attorney General Merrick Garland to a surprise visit to Ukraine, where he announced the appointment of Eli Rosenbaum, a veteran prosecutor best known for his Nazi investigations, to lead the case. US efforts to help track down Russians involved in possible war crimes. in Ukraine. Mr. Putin has categorically denied any accusations of Russian atrocities in Ukraine, which he has long argued is not even a legitimate country.

But in the short term, the United States and its Western allies have resorted to economic sanctions rather than criminal prosecution to persuade Moscow to back down, or at least degrade its ability to sustain the war. For now, at least, that tactic doesn’t appear to have worked, given the soaring demand in Asia for oil from Russia, the world’s third-largest oil producer after the United States and Saudi Arabia.

In May, China’s imports of Russian oil rose 28% month-on-month, reaching a record high and helping Russia overtake Saudi Arabia as China’s largest supplier, according to statistics. of China. According to shipping data analyzed by Kpler, a market research firm, India, which used to buy little of Russian oil, is now bringing in more than 760,000 bpd.

“Asia has saved Russian crude production,” said Viktor Katona, an analyst at Kpler. “Russia, instead of a deeper drop, has almost reached pre-pandemic levels.”

According to Rystad Energy, an independent research and business analysis firm, Russian crude oil sales to Europe fell 554,000 bpd from March to May, but Asian refiners rose 503,000 bpd. /day – almost replace 1-1.

Although Russia is selling oil for big discount because of the risks associated with the sanctions imposed on the invasion of Ukraine, higher energy prices offset. According to the International Energy Agency, Russia brought in $1.7 billion last month compared with April.

It remains unclear whether Asia will buy all the Russian oil once destined for Europe, as the European Union is working to wean itself off the Kremlin’s reliance on energy exports. But for now, the change has allowed Moscow to maintain oil production levels and upset expectations that its output will fall.

The Chinese purchase in particular underscores the support Mr. Putin enjoys from his Chinese counterpart, Xi Jinping, who has pledged strengthen cooperation with Moscow, whatever he was afraid of about the war in Ukraine.

The combination of falling Russian crude oil prices and higher prices at the pump also means India’s refineries are doubling profits, according to analysts. Some of the oil products that India exports have been shipped to the US, UK, France and Italy, according to the Finland-based newspaper. Clean Air and Energy Research Center.

Once refineries turn oil into diesel or gasoline, no one can tell if the fuel they ship to Europe and elsewhere is from Russian crude. That means Western motorists who think they are paying more for non-Russian fuel may be wrong.

Jeff Brown, president of FGE, an energy consulting firm, talks about refined oil products exported to the West.

High global demand for Russian oil and gas is leading Russian officials to declare that Western efforts to limit Russian exports have failed.

Aleksei Miller, the head of Gazprom, Russia’s energy giant, quipped at an economic conference in St.Petersburg last week that he had no malice against Europe for even importing gas. Russia’s natural burning in the continent decreased “several tens of percent”, “Price has increased” many times over. “

“I wouldn’t bend the truth if I told you we had no animosity,” he said.

This month alone, the Russian Finance Ministry estimates, government coffers are expected to receive $6 billion more in oil and gas revenue than anticipated due to high prices.

However, the sanctions are likely to inflict further pain on the Russian economy later this year. And while the rally in Russia’s currency, the ruble, is due in part to the country’s surprising economic resilience, it also reflects tight government controls over capital flows and a decline in capital flows. heavily imported into Russia.

Putin’s government has also drastically reduced the amount of budget data that is made public, making it difficult to quantify how much it is spending on war. Analysts say there is no evidence that Mr. Putin is under immediate pressure – economically or otherwise – to end his military campaign.

But Mr. Nadorshin said that data released by the government showed it was trying to cut spending across the board. And evidence of a shortage in Russian military equipment, with volunteers scrambling to provide first aid equipment and other basic items for the military, showing the limits of the Kremlin’s ability to fund the war effort.

“Getting the government ready to spend is clearly very difficult, despite the courage of official statements,” Mr. Nadorshin said. “It’s not hard to guess that in terms of weapon procurement, not everything is going well.”

Victoria Kim reported from Seoul, Clifford Krauss from Houston and Anton Troianovski from Berlin. Report contributed by Marc Santora from Warsaw, Glenn Thrush from Washington and Rick Gladstone from New York.

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