Russian crude oil shipments by volume have hit their highest level since the beginning of 2022, as Moscow has found new buyers outside Europe following Western sanctions imposed over Moscow’s invasion of Ukraine, according to Bloomberg.
At the same time, Russia’s oil revenues have shrunk by two-thirds. Western sanctions, along with a price cap of $60 per barrel on Russian oil that began February 5, are squeezing the Kremlin’s profits by forcing it to sell at deep discounts.
“On a four-week average basis, overall seaborne exports in the period to May 5 were up by 180,000 barrels a day to 3.63 million barrels a day, the highest since the start of 2022, when Bloomberg began tracking the flows in detail,” the Bloomberg report said.
Almost all of the oil is being shipped to China and India, with smaller amounts heading to Egypt and Turkey.
“Four-week average shipments to Russia’s Asian customers, plus those on vessels showing no final destination, rose to a new high of 3.37 million barrels a day in the period to May 5. That’s up by 124,000 barrels a day from the period to April 28,” Bloomberg said.
Before its February 2022 invasion of Ukraine, Russia shipped around 1.5 million barrels of oil per day to the European Union. However, Western sanctions have reduced that trade to almost zero.
Bulgaria is the only EU member state still importing Russian crude oil, purchasing on average 83,000 barrels a day in the four weeks prior to May 5.
The Kremlin has succeeded in finding new markets, said Stefan Legge, an economist at the University of St. Gallen in Switzerland.
“The EU imports of crude oil from Russia are completely replaced by Egyptian and Indian imports of crude oil. So, Russia has found other buyers, and the EU, in turn, has looked for other suppliers and also found it,” Legge told VOA.
Despite finding new buyers, Russia’s finance ministry said last week that oil export proceeds fell 67% last month, to $6.4 billion. Total federal budget revenues from oil and gas fell 64% in April from a year earlier.
“Russia is suffering,” Legge said. “Yes, they have found new buyers of oil but at a lower price. Urals [Russian oil] is trading at a discount compared to other sorts of oil. And the new buyers are not as attractive as the old ones.”
The new buyers are also much farther away, resulting in average shipping times of 16 to 18 days, up from four to six days for the pre-war shipments to Russia’s European neighbors, according to Reuters.
“That is negative for the cost, so prices in general will go up. And it's also bad for the environment if you think about CO2 emissions. Part of the gamble of Vladimir Putin was that the Western countries would not be willing to bear those costs. But now that we see, I think more than a year, Western countries are willing to accept some of the cost,” Legge told VOA.
The West is trying to persuade allies like India to import less Russian oil.
“But of course, those countries are sovereign countries, and they have their own interests,” Legge added. “In a way, you want to make the second-best option for Russia even worse. But that will have limited success, as history tells us and as the economic analysis tells us today.”
Analysts say some Russian oil is likely still entering European markets. Crude oil is difficult to track, as it can be easily blended with other shipments in transit countries or at sea, while the complexity of shipping companies and vessel flagging adds to the difficulty of enforcing sanctions.