EU oil ban and price cap are costing Russia EUR 160 million per day

Further measures can multiply the impact

As the sanctions and the costs of the invasion of Ukraine take their toll on Russia’s economy, the country is more dependent than ever on revenue from fossil fuel exports. The EU has taken massive steps over the past year to cut off its dependence on fuel imports from Russia and cut off financing for the Kremlin’s unprovoked and illegal assault against Ukraine and Europe.

The short-term windfall generated to Russia by sky-high fossil fuel prices in 2022 is starting to wear out, in part due to reductions in fossil fuel consumption prompted by the high prices. Further cuts to Kremlin’s revenue will therefore materially weaken the country’s ability to continue its assault and help bring the war to an end. CREA’s briefing assesses the impacts of measures taken by the EU and Ukraine’s other allies to date, and identifies further options to drain Kremlin’s war chest.

The EU oil ban and price cap are costing Russia an estimated EUR 160 mn/day. The fall in shipment volumes and prices for Russian oil has cut the country’s export revenues by EUR 180 million per day. Russia managed to claw back EUR 20 million per day by increasing exports of refined oil products to the EU and to the rest of the world, resulting in a net daily loss of EUR 160 million.

https://energyandcleanair.org/

Russia’s Crude Trades At $52

Russian crude is already trading at prices below the proposed G7-EU-UK price 

Russia’s flagship crude grade Urals currently trades at around $52 per barrel, more than $10 a barrel lower than the low end of a proposed G7-EU-UK price cap of $65-$70 per Russian barrel of crude, according to Bloomberg.

No final decision has been taken by the G7 and the EU yet, but the price cap mechanism and the EU embargo on imports of Russian crude by sea are set to enter into force in less than two weeks, on December 5.  Reports emerged on Wednesday that the EU is discussing capping the price of Russian oil at somewhere between $65 and $70 per barrel. Such a cap, if approved, would not effectively lower the price of the flagship Russian crude currently being traded on the market.

A $65-$70 per barrel price cap for Russia’s oil is not expected to immediately shrink Putin’s oil revenues, considering that this is more or less the price that buyers currently pay for Russian crude, multiple industry sources familiar with the transaction prices told Reuters on Thursday.

https://oilprice.com/