"The planet can’t live without it": Russian oil, Putin’s military cash machine

Usually, only the small white and blue boats of local fishermen and a few luxury yachts navigate the crystal clear waters of the Gulf of Laconia, in the southernmost Peloponnese, Greece. But in recent weeks, larger boats have been crisscrossing the Ionian Sea, dangerously skirting the torn coasts of the island of Kythera. At the end of August, two journalists from the Japanese daily Nikkei Asia witnessed a very curious marriage: two tankers glued side by side and gigantic pumps transferring the cargo from one boat to another. In the merchant navy, the maneuver called “ship to ship” is nothing extraordinary. Except that in this specific case, it is Russian oil. The first tanker, the Sea Falcon, flying the Greek flag left on August 4 from the Russian oil terminal of Ust Luga in the northwest of the country. The second, the Jag Lok, is registered in India and left the port of Aliaga in Turkey. Its destination, once its precious cargo is loaded? Unknown. The ship has cut off its transponder, which makes it possible to trace all its movements.

Since the start of the war in Ukraine, and the salvoes of Western sanctions, “ship to ship” has been fashionable. According to data compiled by the London company Refinitiv, 175 transhipments took place off the Greek coast between February and August 2022 compared to only 9 over the same period last year. The port of Kalamata would be the nerve center of this flourishing business. Russian oil shipments from Black Sea ports to Kalamata have doubled in the first three months of the war, according to S&P Global estimates.

“The European Union alone would have paid nearly 100 billion”

While Europe is trying to wean itself off Russian oil and even plans to completely cut off all its crude imports from December 5, the black gold revenues continue to flow into the coffers of the Russian state. And to indirectly finance Vladimir Putin’s war effort. Admittedly, trade and financial sanctions are beginning to pinch the Russian economy: car production is in free fall and airlines, deprived of spare parts by their Western suppliers, are dismantling some of their planes to find the missing equipment. . The embargo on all electronic components also paralyzes the entire defense industry. “With the recessions expected in 2022 and 2023, Russian GDP should return to its level of the year 2000. A leap back by more than twenty years”, we argue at the Quai d’Orsay.

The fact remains that Moscow still sees the dollars from its oil and gas deliveries flowing in. Export volumes may have fallen, but prices have risen so much that dollar-denominated invoices are worth gold. Enough to feed the chorus according to which Russia would not ultimately be so losing economically. According to estimates by the Center for Research on Energy and Clean Air (CREA), a Finnish think tank, the country garnered some 168 billion euros in revenue from its hydrocarbon exports between February 24 and September 15. . “The European Union alone would have paid nearly 100 billion”, calculated for L’Express Lauri Myllyvirta, the director of analyzes of the CREA. Of this hoard, 56 billion would have fallen directly into the coffers of the Russian Treasury. And it is the sales of crude oil and its derivatives, especially diesel, that bring in the most, nearly two-thirds of the total.

Black gold is Putin’s military cash machine. Russia is, of course, the world’s third largest oil producer behind the United States and Saudi Arabia. But it is above all the leading exporter on the planet: nearly 15% of the world’s crude oil supply comes from the Urals and Siberia deposits. Putin knows it. And Putin abuses it. Especially since it is much easier and faster to change the route of the tankers than to build new gas pipelines. “From the start of the war, Moscow went looking for new customers, and it found many, ready to buy its oil at bargain prices”, explains Pierre Terzian, the director of Petrostrategies. As if a new oil geopolitics were taking shape, marrying the map of the Poutinophile regimes.

If in the spring, the discount to the price of Brent – North Sea oil – reached nearly 35 dollars a barrel, the difference would have been reduced to around twenty dollars today. More than enough to find Russian shipments financially very attractive for a whole bunch of Asian or African countries that haven’t really raised their voices after the invasion of Ukraine. Foremost among which China but above all india. The country that did not buy a drop of Russian oil before the war suddenly became very greedy. Just like Brazil, which signed with Moscow at the beginning of July, a huge contract which would cover nearly 30% of world sales of Russian diesel…

And then there are also the opportunists, like Egypt and especially the United Arab Emirates. “The latter were past masters in the import-export of Iranian oil, under sanction. They do the same thing with Russian crude”, points out Pierre Terzian. In August, the arrivals of Russian oil in the gigantic port of Fujairah, on the east coast of the Emirates, reached peaks. Black gold that the Emiratis mix with theirs to re-export around the world. Better still, they refine Russian crude on the spot and then resell it at a high price in Europe, Great Britain and even the United States. Even at the exit of the pipelines, Russian oil continues to flow. In Ceyhan, Turkey, the “BTC” pipeline, which links Baku in Azerbaijan to Tbilisi in Georgia then crosses Turkey to reach the Mediterranean, saw its capacity suddenly increase by 250,000 barrels per day between April and July… Problem , the Azeris claim to have reduced their production of black gold. “So it’s Russian oil flowing like in the good old days of the Soviet Union,” argues Pierre Terzian.

“Russian crude is everywhere and the planet can’t live without it,” adds Alexandre Andlauer, analyst and oil market specialist at Kpler. Could the European embargo in early December change the situation? By looking for new customers, the Russians have prepared for this. But it’s the possibility of capping the purchase price of Russian oil that could really hurt Vladimir Putin’s wallet. A woman is behind the idea: Janet Yellen, the US Treasury Secretary. The first sketches of this new weapon were presented recently. To put it simply, this would mean forcing insurance companies to insure only cargoes purchased at or below a price fixed in advance, probably close to 60 dollars per barrel (the price of oil around $90 today). And whatever their destination. A very effective weapon since almost all insurers specializing in oil transport are Western and especially British.

But here again, the Russians are preparing the response: for several weeks, they have been rushing to second-hand tankers available on the market so as not to depend on any shipowner. “They would even be fine-tuning a 100% public insurance system benefiting from the guarantee of the State”, explains Arnaud Dubien, the director of the Franco-Russian observatory in Moscow. In the meantime, the dark clouds hanging over global growth could dry up the Russian cash machine. “If the world enters a recession, then oil prices will fall, depriving Russia of its very comfortable revenues”, analyzes Francis Perrin, researcher at the Institute of International and Strategic Relations. Financially too, the tide may be turning for Vladimir Putin.


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