Russia earns around $500 million from oil exports, daily. And while the world is weaning itself off the Russian supply, some are eager to continues propping up Moscow’s coffers.
As EU’s newest wave of Russia sanctions is taking shape, it’s clear that an embargo on Russian energy isn’t coming just yet, meaning that the spine of Russia’s economy remains intact.
In 2019, Russia exported 54% of its coal, 31% of natural gas, and 70% of its extracted oil, according to the International Energy Agency. Most of the coal was sold to China, while oil and gas flows through the pipelines to Europe.
The EU is banning only coal imports from Russia in the latest sanctions package – around $4 billion in annual revenue, a figure dwarfed by European purchases of oil and gas. NV Business looked into the structure of Russian oil exports.
Billions in oil
In 2021, Russia sold 230 million tons of oil (-3.6% YoY) for $110 billion (+52.2%), according to the Russian customs service. This growth in revenues, considering stagnant output, was due to spiking global oil prices. On top of that, the country also exported 144.3 million tons of oil products (+1.8%), worth $70 billion (+54.3%).
This amounts to $180 billion in revenue. Provided prices remain high, and their major customers keep up purchases, Russia will have a lot of cash to support its internal markets and finance their war in Ukraine.
Who buys Russian oil, and why is the EU pivotal?
Russia is the world’s largest exporter of oil, and second-largest exported of crude after Saudi Arabia. Every day, Russia ships 2.85 million barrels of oil via ports and pipelines.
According to The Hill, the EU and China buy 90% of Russian oil exports. In 2021, Russia sold 42% of its extracted oil to Europe, 14% – to China, with 30% sold on the domestic market.
Some eastern European countries are almost entirely dependent on Russian oil. For example, Lithuania gets 83% of its oil from Moscow, followed by Finland at 80%, Slovakia at 74%, Poland at 58%, Hungary at 43%, and Estonia at 34%. The largest consumers, however, all less tied to Russia. Germany, for instance, gets only 30% of its oil from Russia.
According to the UN Comtrade Database, the following European countries bought the most Russian oil in 2020:
The Netherlands – 31.8 million tons;
Germany – 21.8 million;
Poland – 14.9 million;
Italy – 12.6 million;
Finland – 9.2 million;
Slovakia – 5.5 million;
Hungary – 3.8 million;
The UK – 3.1 million;
Besides those, China, Japan, and South Korea are among the top consumers of Russian crude.
Belarus is a special case. It gets almost 14.8 million tons of oil from Russia, while paying a lower price than the rest of the world. The “special relationship” between the two countries includes this substantial discount. Prior to the deterioration of relations between Ukraine and Belarus, Ukraine was the primary consumer of Belarussian oil products. According to consulting agency A-95, Belarus oil refineries have lost their main market as a result, compounded by the ongoing war. And Ukrainian business has no intention to ever resume buying their output. Essentially, Russia has jeopardized not simply its closest ally, but a country that was responsible for 6% of its oil exports. A-95’s head, Serhiy Kuyun, thinks that Novopolotsk oil refinery in Belarus will have to close down.
Who will refuse Russian oil?
So far, only four countries banned imports of Russian oil: Australia, the UK, Canada, and the United States. In 2020, only two of those countries bought any – the UK and the United States – worth $2 billion, combined. Given higher prices, we can estimate that Moscow is going to lose about $3 billion in revenue from them.
Together with Belarus, Russia might lose around $7-8 billion in oil revenues this year.
Other major consumers are staying put for now. Even Lithuania, which championed banning Russian gas imports in Europe, stopped short of doing the same with oil. In 2020, one of their Polish-owned refineries purchased 2.6 million tons of Russian oil, for $740 million. Last year, that figure could have risen to $1 billion. In January, the same company entered in agreement with Saudi Arabia’s Saudi Aramco to cover half of Poland’s oil needs. Poland is aiming to wean itself off Russian oil by the end of the year, so the situation in Lithuanian could change as well.
Germany pledged to cease importing Russian oil by 2023.
The Netherlands, Hungary, and Austria are opposed a Russian oil embargo.
While governments are reluctant to shut off the faucet, European companies are voluntarily avoiding signing new contracts with Russian oil suppliers, fearing reputational losses and legal trouble, according to Reuters. Energy companies from Japan, Italy, Norway, and Sweden, among other countries, have stopped signing new deals with the Russians.
India and China, meanwhile, are only eager to snap up Moscow’s oil, at large discounts.
According to Reuters, various Indian oil refineries purchased at least 14 million barrels of Russian oil since Feb. 24. In 2021, they bought 16 million barrels over the course of the entire year.
There is some good news even in this part of the world, though. Recent reports suggested that state-owned Chinese oil refining enterprises are not signing new contracts with Russia, even if existing deals remain in place.