During the war, business continued.

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

Moscow has, in fact, earned 63 billion euros by selling gas, oil or coal since February 24, the date on which Russian troops began their offensive in Ukraine, according to estimates by Crea experts.

Twice as much revenue as last year

European countries - starting with Germany - prance in the lead in expenditure linked to hydrocarbon imports from Russia, ahead of China and Turkey.

“The states of the European Union paid 44 billion euros [including more than 9 billion euros for Germany alone, editor’s note] to Moscow during the first two months of the war in Ukraine, almost double what that the European bloc spent last year at the same time", underlines Lauri Myllyvirta, chief analyst of Crea and author of this report entitled "Financing Putin's war in Europe: Russian energy exports since February 24 ”.

BREAKING: Our new research tracked the flows of EUR63 billion worth of fossil fuels from Russia in the first two months of the brutal invasion of Ukraine, revealing the largest importers.

It's time to stop supporting Putin's war crimes.

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— Center for Research on Energy and Clean Air (@CREACleanAir) April 28, 2022

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 Finnish research center.

It is impossible, however, to know the exact revenues derived from these exports because certain tariffs are fixed in long-term contracts which are not made public.

But "with our model and in the current state of knowledge, we believe that this is the closest possible estimate to reality," says Lauri Myllyvirta.

Above all, this report sheds a harsh light on the reality of the effects of sanctions and threats of sanctions on Russia.

He notes, in fact, that Russian exports of fossil fuels have indeed collapsed since the start of the war.

In this, the sanctions worked.

“We were even surprised by the extent of the drop, even though in some countries the embargo on Russian gas and oil is not even in force yet, and in other regions such as the EU , it is still essentially threats [apart from the embargo on Russian coal, editor's note]”, recognizes Lauri Myllyvirta.

For him, this is a sign that energy traders have gone faster and further than governments to do without Russian gas or oil.

They anticipated the sanctions to come and preferred to cut ties with Moscow before being forced to do so.

So where do the record revenues from Russian hydrocarbon exports come from?

Ironically, this is partly a consequence of the sanctions.

These have deprived the market of a large quantity of resources, which has caused prices to soar for the little that remained available, allowing “Moscow to compensate for the drop in its exports”, believes Lauri Myllyvirta.

Exports faltering and prices soaring

Some players have also rushed into Russian black gold, gas and coal before no longer having access to them because of the sanctions.

“If we take the European example, there has been an increase in imports of Russian coal because the EU warned well in advance that an embargo would come into force from August”, underlines the analysis of the Crea.

Russia has also done everything to find new buyers.

The analysis of the movements of Russian freighters illustrates this frantic quest.

“There has thus been a significant increase in the number of Russian vessels filled with hydrocarbons which have set sail, without a precise final destination, in the hope of finding a buyer on the way”, remarks Lauri Myllyvirta.

However, a large part of these convoys never found takers.

Several countries, such as India, Egypt or China, have actually increased or started to import Russian hydrocarbons.

The data shows a 210% increase in liquefied natural gas exports to China… which is not difficult since Beijing hardly bought any before the conflict in Ukraine.

But “this is not enough to compensate for the loss of outlets in Europe.

Especially since we think that Russia will not be able to diversify its clientele much more”, assures Lauri Myllyvirta.

First, because the number of countries ready to convert, for example, to Russian oil is limited.

“Each crude has its specificities, and European crude – which is the one produced by Russia – requires specific refining processes that not all countries necessarily want to adopt”, specifies the expert.

This would indeed require investing in new facilities, which not all countries are prepared to do.

Then, exporting gas or oil to India, Indonesia or China is not as simple as sending 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 don't hurt Russia's wallet as badly as they might because of Europe's reliance on “made in Russia” fossil fuels.

The Crea suggests accelerating the energy transition in Europe and, while waiting to be able to do without Russian imports, to “consume less energy”.

A bleak prospect for European households and which would require “incentive measures from the States [energy checks, subsidies for the insulation of buildings, etc.] to pass this course”, believes Lauri Myllyvirta.  

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