Russia still profits from oil despite sanctions but green energy shift could have a negative effect

Oil exports have declined but revenues have increased, providing the country with significant funds to continue the war in Ukraine.

Oct 21, 2023 - 01:30

Russia still profits from oil despite sanctions but green energy shift could have a negative effect

Western sanctions that put a price cap on Russian oil exports from December 2022 aimed to cause the country significant economic pain after its invasion of Ukraine last year. The idea was to curtail the amount Russia makes from its oil while ensuring it continues to flow into the global market to reduce price pressures on consumers around the world.

Back then, oil prices were trading around US$80 (£66) per barrel (/bbl). More than 10 months later, the opposite has happened: Russian exports have declined but its revenues have increased, providing it with significant funds to continue the war.

This is because since July 2023, oil prices have been above US$80/bbl, exceeding US$95/bbl at times – levels last seen in November 2022. Even though it was subject to a price cap, Russian oil has been in even greater demand due to a squeeze on supply in global oil markets.

Russia’s global oil market position doesn’t seem to be threatened by sanctions and caps. But domestic problems and market changes that have been brewing long before the war in Ukraine could affect Russia’s oil industry for a long time to come.