In the midst of the war in Ukraine, Moscow pocketed the jackpot

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While Moscow has been accused of energy “blackmail” after it cut gas supplies to Bulgaria and Poland, a new report by an independent research center released on Wednesday reveals that Russia has made substantial profits from its hydrocarbon exports since the war began scored in Ukraine. Mainly thanks to Europe.

Business continued during the war. And for Russia, hydrocarbon exports have proven very lucrative despite the avalanche of international sanctions, according to a report released Wednesday, April 27 by the Research Center for Energy and Clean Air (Crea), a think tank based in Finland.

In fact, since February 24, the date Russian troops began their offensive in Ukraine, Crea experts estimate that Moscow has earned 63 billion euros from the sale of gas, oil or coal.

Twice as much sales as in the previous year

European countries – starting with Germany – are prancing at the forefront of spending related to hydrocarbon imports from Russia, ahead of China and Turkey. “The states of the European Union have paid 44 billion euros [dont plus de 9 milliards d’euros pour la seule Allemagne, NDLR] in Moscow in the first two months of the war in Ukraine, that is, almost twice as much as the European bloc spent at the same time last year,” emphasizes Lauri Myllyvirta, Crea’s chief analyst and author of this report entitled “Putin’s funding War in Europe: Russian Energy Exports since February 24”.


These data are estimates “based on the analysis of the movements of Russian cargo ships transporting hydrocarbons and public data on energy sales,” specifies the expert from the Research Center of Finland. However, it is impossible to know the exact earnings from these exports as certain tariffs are set in long-term contracts that are not made public. But “with our model and the current state of knowledge, we believe this is the most realistic estimate,” says Lauri Myllyvirta.

Above all, this report sheds a harsh light on the reality of the impact of sanctions and threats of sanctions against Russia. In fact, he notes that Russian fossil fuel exports have actually collapsed since the war began. The sanctions have worked. “We were even surprised at the magnitude of the drop, despite the fact that in some countries the embargo on Russian gas and oil is not even in effect, and in other regions like the EU there are still essentially threats [mis à part l’embargo sur le charbon russe, NDLR]“, recognizes Lauri Myllyvirta.

To him, this is a sign that energy traders have gone faster and further than governments to forego Russian gas or oil. They anticipated the coming sanctions and preferred to sever relations with Moscow before being forced to do so.

So where are the record earnings from Russian hydrocarbon exports coming from? Ironically, this is partly a consequence of the sanctions. These have drained a large amount of resources from the market, causing prices to skyrocket for what little was left, allowing “Moscow to compensate for the drop in its exports,” believes Lauri Myllyvirta.

Exports falter and prices rise

Some players also dabbled in Russian black gold, gas and coal before being barred from access due to sanctions. “Let’s take the European example: Imports of Russian coal have increased because the EU warned in good time that an embargo would come into force from August,” underlines Crea’s analysis.

Russia also did everything possible to find new buyers. Analysis of the movements of Russian freighters illustrates this hectic search. “As a result, the number of Russian ships laden with hydrocarbons that set sail without a clear final destination, hoping to find a buyer along the way, has increased significantly,” notes Lauri Myllyvirta. However, a large proportion of these convoys never found buyers.

Several countries such as India, Egypt or China have even increased or started importing Russian hydrocarbons. The data shows a 210% increase in liquefied natural gas exports to China… which is not difficult given that Beijing hardly bought any gas in Ukraine prior to the conflict.

But “that is not enough to compensate for the loss of sales outlets in Europe. Especially since we believe that Russia cannot diversify its clientele much more,” assures Lauri Myllyvirta. First, because the number of countries willing to switch to Russian oil, for example, is limited. “Each crude oil has its peculiarities, and European crude oil – that produced by Russia – requires specific refining processes that not necessarily all countries want to adopt,” specifies the expert. Indeed, this would require investments in new plants, which not all countries are willing to do.

Then exporting gas or oil to India, Indonesia or China is not as easy as transporting it to Europe, where the hydrocarbons are transported through pipelines. The trips are much longer and more expensive, which makes these destinations much less attractive to Moscow.

This report, therefore, illustrates the whole paradox of sanctions against Russian hydrocarbon exports. They work, but they don’t hurt Russia’s wallet as much as they could, given Europe’s reliance on Russian-made fossil fuels. Crea proposes accelerating the energy transition in Europe and “using less energy” in anticipation of being able to do without Russian imports. A bleak prospect for European budgets in need of “stimulus measures by governments”. [chèque énergie, subventions pour l’isolation des bâtiments, etc.] to pass this course,” estimates Lauri Myllyvirta.

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