Brussels.
How do the import ban and the price cap for Russia’s oil work? A first balance shows billions in losses for the war chest.
Russia has many of the western sanctions survived surprisingly well so far because of the Ukraine war. But one of the most recent punitive measures is now really hurting President Vladimir Putin: The new oil embargo and the associated oil price cap are costing the Kremlin a lot of money.
Russia has been missing out on income of 160 million euros a day since the EU countries stopped importing Russian sea oil on December 5 and Germany also stopped importing sea oil at the end of the year pipeline oil to East Germany prohibited. This is shown by a study by the Finnish research organization Center for Research on Energy and Clean (CREA) on the first effects of sanctions.
If on February 5th that too Ban on import Russian refinery products such as diesel or kerosene come into force, the loss should rise to 280 million euros per day. By the end of the year, Russia will therefore lack income of almost 100 billion euros. “The EU oil ban and oil price cap have finally come into effect, the impact is as significant as expected,” says Crea chief analyst Lauri Myllyvirta. “This shows that we have the means to help Ukraine prevail against Russian aggression.”
Oil sanctions work: Putin lacks billions for his war
The assessment of the Berlin Science and Politics Foundation (SWP), which advises the federal government, is similar: “2023 will be a significantly worse year for Russian raw material exports than 2022,” says SWP Russia expert Janis Kluge. The new sanctions are a major obstacle to Russian exports. “Russia has to push its oil onto the market at high discounts,” explains Kluge. The consequences are clear: Vladimir Putin has significantly less financial leeway to continue his war of aggression against Ukraine.
The EU states had already decided on the embargo in the summer, so as not to continue with the oil billions Putin’s war against Ukraine finance; only Hungary, Slovenia and the Czech Republic are initially allowed to obtain oil via pipelines from Russia because of their special dependency. In addition, in December the European Union, the USA and other Western industrialized countries agreed on an oil price cap: According to this, Russia should be able to continue selling oil to third countries so that there are no bottlenecks on the world market – but a price cap of 60 dollars per barrel ( about 159 liters) should reduce the income for the Kremlin. The lever: Russian oil at prices over 60 dollars are not allowed to transport the – mostly European – shipping companies, otherwise they face penalties.
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Because of the price cap: Russia has to sell its oil at low prices
Some experts had feared that oil prices would go through the roof as a result. The opposite is the case, the price has fallen and Russian oil is trading at deep discounts, as the West hopes. Brent oil from the North Sea currently costs around 79 dollars a barrel, while Russian Ural oil costs 38 dollars – Russia is selling its “black gold” at a bargain price. China and India seize the opportunity to buy oil at a bargain price. the Russian Central Bank is already talking about a “new economic shock” that will significantly weaken economic momentum.
According to the Crea study, the EU’s crude oil import ban and the price cap Already in December, Russian crude oil exports fell by 12 percent and sales prices by 23 percent – which together caused revenues to shrink by a third. In addition to these measures, Germany stopped imports of pipeline oil at the end of December that had previously flowed to the Schwedt (Brandenburg) and Leuna (Saxony-Anhalt) refineries; this resulted in a further decrease of 5 percent.
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After stopping oil imports from Russia: the Schwedt refinery is not yet working to capacity
However, despite these sharp falls, Russia’s fossil fuel exports still bring in €640 million a day, which is expected to fall to around €520 million as of February. Not only the Ukraine had therefore demanded a much lower upper price limit from the start. The authors of the Crea study are now calling for the upper price limit to be lowered from $60 to $25 to $35. However, the willingness to do so in the West is not likely to be all that great, especially not in Germany. Because it is not yet clear how good they are Side effects of the oil embargo can be cushioned.
Before the start of the Ukraine war, oil imports from Russia covered around 35 percent of Germany’s needs. So far, the Russian tanker oil can be completely replaced, as the mineral oil industry assures. The balance sheet for the PCK Schwedt refinery in Brandenburg, which previously received crude oil from Russia via the Druzhba pipeline, is not so positive. Currently, the refinery is only about half full with deliveries via the port of Rostock. Federal Minister of Economics Robert Habeck (Greens) assures that with timely deliveries via Gdansk the capacity utilization will rise to 70 percent; this is not yet contractually secured. At least resigned Kazakhstan is now planning to deliver 300,000 tons of crude oil via the Druzhba pipeline in the first quarter – given the annual capacity in Schwedt of 12 million tons, this is not yet a breakthrough. In addition, the oil has to be routed through thousands of kilometers of oil pipelines belonging to the Russian state-owned company Transneft. Despite the oil embargo, Russia then earns a lot from the transit fees.
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