The European Union’s embargo on Russian oil transported by ship and the price cap decided by the EU, the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) and Australia have resulted in a daily loss of €160 million for Russia, the Centre for Research on Energy and Clean Air (CREA), a research organisation, said in a note published on Wednesday 11 January.
According to the document, these measures, which have been in force since 5 December (see EUROPE 13077/20), led to a 12% drop in Russian crude oil exports in December and a 23% fall in selling prices, resulting in a 32% drop in Russia’s crude oil revenues.
This decline is also expected to increase with the extension of the EU embargo and price cap on refined oil products starting 5 February 2023. CREA estimates that these upcoming measures, coupled with the reduction in oil pipeline imports to Poland, will result in a further reduction in Russian revenues of around €120 million per day.
However, it should be noted that the countries forming the Russian oil price cap coalition have not yet agreed on how to deal with refined products.
According to a G7 official, the coalition will seek to have two caps to reflect the fact that some of these products are traded at a higher price and others at a lower price than the reference prices.
This official also welcomed the fact that the cap had not caused a price surge, calling the mechanism a “massive success”.
For CREA, this shows that the coalition still has some room to lower the cap. “Russia has not found a meaningful alternative to vessels owned and/or insured in the G7 for the transportation of Russian crude and oil products from Baltic and Black Sea ports”, the organisation said.
It estimates that Russia will lose at least €100 million per day as a result of lowering the cap from $60/barrel to $25-35.
Russian reaction
Faced with falling Russian oil revenues, the Russian Energy Ministry said, on Tuesday 10 January, that it was working on additional measures to limit discounts on Russian oil prices compared to international benchmarks. On 27 December, Russian President Vladimir Putin also signed a decree banning the supply of crude oil and petroleum products to coalition countries starting 1 February for 5 months.
According to estimates, Russia still draws €640 million per day from fossil fuel exports, compared to a maximum of €1 billion between March and May 2022.
See the note: https://aeur.eu/f/4up (Original version in French by Damien Genicot)