Tankers in waters near Ceuta, Spain, transfer crude oil from Russia to reach Asian markets despite Western sanctions.
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According to a new report, Russia’s oil revenues rebounded in March and April to their highest level since November last year, bolstering President Vladimir Putin’s ability to fund the Kremlin assault on Ukraine.
Analysis released Wednesday by the Center for Energy and Clean Air Research, an independent Finnish think tank, found that Russia’s revenue from oil exports has recovered from levels seen in January and FEBRUARY.
The results show that Moscow has recently managed to claw back fossil fuel export revenues despite the imposition late last year of European Union import bans and a wider fuel price cap. G7 oil.
It comes less than a week after G7 leaders said at the end of the Hiroshima summit in Japan, that a price cap on Russian oil and petroleum products was working, Russian revenues were falling, and falling oil and gas prices were benefiting countries around the world.
CREA energy analysts have suggested that the failure of the so-called Price Cap Coalition to revise price levels and enforce the policy has resulted in the measures’ “loss of traction, integrity and credibility”.
“The EU has failed in its commitment to review the price cap every two months to ensure that it remains below the average market price,” said Lauri Myllyvirta, senior analyst at CREA and co-author of the report. .
“It’s a clear indication that the app is not working,” he added.
A European Union spokesperson declined to comment when contacted by CNBC.
Russia’s oil revenue recovery set to continue
At the beginning of the year, the data showed that Russia’s revenue from fossil fuel exports collapsed in December. This appeared to underscore the effectiveness of policymakers targeting Russia’s oil revenues and sparked calls for even tougher measures to help kyiv prevail.
The latest CREA findings, however, show that Russia’s oil tax revenue rose 6% month-on-month in April due to higher export earnings in March.
To be sure, Kremlin revenues were significantly lower than the levels recorded in April of last year, when oil prices surged.
Rising export earnings in March led to a 5% month-on-month rebound in Russia’s mining tax receipts in April, the report found – and an even bigger increase is expected in May.
This means that after bottoming out in early 2023, Russia’s oil tax revenue has since recovered due to increased sales.
Russian President Vladimir Putin meets with Chief Justice Vyacheslav Lebedev at the Kremlin in Moscow on May 22, 2023.
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“Kremlin tax revenue has closely tracked Russian crude oil prices, underscoring the importance of the oil price cap. The state is also changing its tax regime to reduce the impact of the price cap,” Isaac said. Levi, energy analyst at CREA.
“Unless the price cap coalition takes steps to lower the price cap level and close enforcement gaps, changes to Russia’s oil tax structure will force the price of oil Russian crude to approach international benchmarks, leading to another recovery in Russia’s oil revenues and a wholesale failure. of the price cap system,” he added.
CREA’s analysis indicated that since the EU import bans and G7 price caps on Russian oil, Moscow has earned about 58 billion euros ($62.5 billion) in revenue from marine oil export.
The majority of which was transported on European-owned or insured tankers, he added. Russia’s revenue could be cut by another 22 billion euros if the crude oil price cap was reduced to $30 a barrel and the price caps for petroleum products were revised accordingly, CREA said.
The G7, Australia and the EU put in place a price cap of $60 a barrel on Russian oil on December 5. This was accompanied by a decision by the EU and the UK to ban the import by sea of Russian crude oil.
Together, the measures were seen as reflecting by far the most significant step in reducing fossil fuel export revenues that are funding Russia’s war in Ukraine.
In February, the Price Cap Coalition continued its crude oil price cap by imposing a price cap of $100 per barrel on Russian petroleum products such as diesel and a cap of $45 per barrel on Russian petroleum products such as fuel oils which trade at a discount to crude oil. .
The objective of the price cap policy is to restrict Russia’s oil revenues while maintaining the supply of Russian oil. The US Treasury said in an update last week, nearly six months after the price cap was implemented, the policy achieved both goals.
The Treasury estimates that Russia’s oil revenues have fallen to just 23% of the Russian budget this year, falling from 30% to 35% of the total Russian budget before Moscow launched its war in Ukraine in February 2022.
The United States said the drop in revenue came at a time when Russia was exporting up to 10% more crude oil in April 2023 than March last year.