Since it was founded in 1983, the monthly report by the International Energy Agency (IEA) on the oil market has been authoritative. Its delivery in March therefore arouses great interest from Western countries. After a series of sanctions staged since Ukraine’s aggression in February 2022, the strangulation strategy of the European Union (EU) and the G7 – the seven liberal economies…
Since it was founded in 1983, the monthly report by the International Energy Agency (IEA) on the oil market has been authoritative. Its delivery in March therefore arouses great interest from Western countries. After a series of sanctions since Ukraine’s aggression in February 2022, the strangulation strategy of the European Union (EU) and the G7 – the seven most powerful liberal economies – appears to be beginning to bear fruit. At the beginning of December, the EU and the G7 banned the landing of Russian oil in their ports. They also capped the price of the Russian barrel, which is used for export by sea and is largely controlled (freight and insurance) by Western countries. In early February, the embargo extended to refined products made from Russian oil.
Last month, the IEA estimated that Russian oil exports hit 8.2 million barrels per day (mb/d) in January. They fell to 7.5 mb/d in February, according to the agency. The Kremlin cash drawer suffered the immediate backlash. “Export earnings fell further from $2.7 billion to $11.6 billion, down 42% from a year ago,” the experts note.
2 – Russia stuffed itself last year
This picture of decline contrasts with the unabashed sanity of Russia’s fossil fuel industry last spring. At the time, Vladimir Putin was sitting on a pile of gold. European countries, especially Germany, were still supplied by Gazprom, the No. 1 gas supplier in Russia. And the price of a barrel of oil on the world market was at times just under $120 (159 liters), a stratospheric price.
A study released in June by the Center for Research on Energy and Clean Air (Crea), an independent institute, had estimated Russian fossil fuel export revenues during the first hundred days of the war in Ukraine at 93 billion euros, including 57 billion handled by EU countries. The wind turns.
3 – Putin’s war money
Exporting fossil fuels (oil, gas, coal) is the Kremlin’s main source of income to fund its costly war in Ukraine, which is consuming men and equipment. Western sanctions are not drying up the flow of money, quite the opposite. Russian volumes mostly benefit China (20% of its oil imports) and India (40%), but at rock-bottom prices. According to the IEA, this equalization mechanism in particular is reaching its limits. The number of Russian shipments to these two destinations fell in February. More bad news for Vladimir Putin: World oil stocks are at their highest level in eighteen months.
Even if Africa, Turkey and the Middle East absorb some of the Russian oil that the West no longer wants, the account isn’t there. “For at least this month, Moscow has announced that it will reduce its production by 500,000 barrels/day,” the IEA recalled.