RUS | ENG | All
Enter the email or login, that you used for registration.
If you do not remember your password, simply leave this field blank and you will receive a new, along with a link to activate.

Not registered yet?
Welcome!

2022-06-01 10:55:00

RUSSIA SANCTIONS $285 BLN

RUSSIA SANCTIONS $285 BLN

BLOOMBERG - JUNE 1, 2022 - In early March, as the US and its allies unleashed a wave of sanctions on Russia, President Joe Biden stood in the White House and said they wanted to deal a “powerful blow to Putin’s war machine.”

But as the war in Ukraine approaches its 100th day, that machine is still very much operational. Russia is being propelled by a flood of cash that could average $800 million a day this year — and that's just what the commodity superpower is raking in from oil and gas.

For years, Russia has acted as a vast commodity supermarket selling what an insatiable world has needed: Not just energy, but wheat, nickel, aluminum and palladium too. The invasion of Ukraine has pushed the US and the European Union to rethink this relationship. It’s taking time, though the EU took a further step this week by hammering out a compromise agreement on Russian oil imports.

Russia is far from unscathed by the sanctions, which have made it a pariah across the developed world. Corporate giants have fled, many walking away from billions of dollars of assets, and the economy is heading for a deep recession. But Putin can ignore this damage for now, because his coffers are overflowing with the revenue from commodities, which have become more lucrative than ever thanks to the surge in global prices driven in part by the war in Ukraine.

Even with some countries halting or phasing out energy purchases, Russia's oil-and-gas revenue will be about $285 billion this year, according to estimates from Bloomberg Economics based on Economy Ministry projections. That would exceed the 2021 figure by more than one-fifth. Throw in other commodities, and it more than makes up for the $300 billion in foreign reserves frozen as part of the sanctions.

EU leaders know that they should stop buying from Russia and indirectly funding a devastating war on Europe’s doorstep. But for all that ambition, national governments also know there will be repercussions for their own economies.

They agreed this week to pursue a partial ban on Russian oil, paving the way for a sixth package of sanctions, but only after weeks of haggling and division.

“There are always political constraints on the use of sanctions,” said Jeffrey Schott, a senior fellow at the Peterson Institute in Washington. “You want to maximize the pain on your target and minimize the pain on your constituency at home, but unfortunately, that’s easier said than done.”

In the US, officials are debating ways to ratchet up the financial pressure, possibly by helping to impose a cap on the price of Russian oil or slapping sanctions on countries and companies still trading with Russian businesses under restrictions. But such secondary sanctions are deeply divisive and risk damaging relations with other countries.

The US has already banned Russian oil, but Europe is only slowly weaning itself off this dependency. That’s giving Moscow time to find other markets — such as commodity guzzling behemoths China and India — to limit any to damage to export revenue, and its financial war chest.

That means the money is gushing into Russia’s accounts, and the financial figures are a constant reminder to the West that dramatic change is needed. Oil-export revenue alone is up 50% from a year earlier, according to the International Energy Agency. Russia’s top oil producers made their highest combined profit in almost a decade in the first quarter, Moscow-based SberCIB Investment Research estimates. And wheat exports continue — at higher prices — as sanctions on Russian agriculture aren't even being discussed because the world needs its grain.

The current account surplus, the broadest measure of trade in goods and services, more than tripled in the first four months of the year to almost $96 billion. That figure, the highest since at least 1994, mainly reflected a surge in commodity prices, though a plunge in imports under the weight of international sanctions was also a factor.

The ruble has become another symbol used by Putin to project strength. Once mocked by Biden as “rubble” when it initially collapsed in response to the sanctions, it’s since been propped up by Russia to become the world’s best-performing currency against the dollar this year.

Putin has also tried to leverage Russia’s position as a commodity superpower. Amid concern about food shortages, he’s said he’ll allow exports of grain and fertilizer only if the sanctions on his country are lifted.

“If the goal of sanctions was to stop the Russian military, it wasn't realistic,” said Janis Kluge, senior associate for Eastern Europe and Eurasia at the German Institute for International and Security Affairs in Berlin. “It can still fund the war effort, it can still compensate for some of the damage sanctions are doing to its population.”

One of the big holes in the sanctions against Russia is the willingness of other nations to continue oil purchases, albeit at a discount in some cases.

Indian refiners purchased more than 40 million barrels of Russian oil between the start of the Ukraine invasion in late February and early May. That’s 20% more than Russia-India flows for the whole of 2021, according to Bloomberg calculations based on trade ministry data. Refiners are seeking private deals instead of public tenders to get Russian barrels cheaper than market prices.

China is also strengthening its energy links with the country, securing cheaper prices by buying oil that’s being shunned elsewhere. It’s boosted imports and is also in talks to replenish its strategic crude stockpiles with Russian oil.

It’s a similar story for steelmakers and coking coal. Imports from Russia rose for a third month in April to more than double last year’s level, according to official custom office data. And some sellers of Russian oil and coal have tried to make things easier for Chinese buyers by allowing transactions in yuan.

“The vast majority of the world is not involved in imposing sanctions,” said Wouter Jacobs, founder and director of the Erasmus Commodity & Trade Centre at the Erasmus University in Rotterdam. “The trade will go on, the need for fuels will be there” and buyers in Asia or the Middle East will step up, he said.

When it comes to gas, Russia has fewer options for diverting supplies, but the countries at the end of pipelines from Russia — some of which run through Ukraine — are also locked into a mutual dependency.

About 40% of the EU’s gas needs are met by Russia, and this will be the bloc’s hardest link to sever. European deliveries even jumped in February and March as the invasion caused a price spike in European gas hubs, making purchases from Russia’s Gazprom PJSC cheaper for most customers with long-term contracts.

Volumes have decreased since then, thanks to warmer weather and record inflows of liquefied natural gas from the US and other countries. There’s also been disruptions because of military activity, and Russia itself halted supplies to Poland, Bulgaria and Finland, which refused Putin’s demand to pay in rubles.

Even as the EU reduces its dependency — Germany says it’s down to 35% from 55% — there are complications at every step. Several big buyers of Russian gas have gone out of their way to keep buying the crucial fuel, and utilities such as Italy’s Eni SpA and Germany’s Uniper SE expect supplies to continue.

While progress is slow, the direction is only toward more and more restrictions. Even with the uncertain timetable, the pressure on the Russian economy, and Putin’s finances, will eventually mount.

The country’s energy sector is also facing an array of other factors beyond demand, from shipping and insurance restrictions to weak domestic demand. Oil production may drop more than 9% this year, while gas output may decline 5.6%, according to Russian Economy Ministry's base-case outlook.

“In the Kremlin there's some optimism and even surprise that the Russian economy didn't collapse from the onslaught of sanction,” said Tatiana Stanovaya, founder of political consultant R.Politik. “But looking ahead two to three years, there's a lot of questions about how the energy and manufacturing sectors will survive.” 

-----


Earlier:

RUSSIA SANCTIONS $285 BLN
2022, May, 31, 13:05:00
EUROPE BANS RUSSIAN OIL
"The sanctions will immediately impact 75% of Russian oil imports. And by the end of the year, 90% of the Russian oil imported in Europe will be banned," Michel said in a tweet after a summit meeting.
RUSSIA SANCTIONS $285 BLN
2022, May, 23, 13:10:00
EUROPEAN ENERGY PLAN
REPowerEU is about rapidly reducing our dependence on Russian fossil fuels by fast forwarding the clean transition and joining forces to achieve a more resilient energy system and a true Energy Union.
RUSSIA SANCTIONS $285 BLN
2022, May, 13, 11:30:00
RUSSIAN SANCTIONS FOR EUROPE
Germany, Russia's top client in Europe, said some subsidiaries of Gazprom Germania were receiving no gas because of the sanctions.
RUSSIA SANCTIONS $285 BLN
2022, May, 12, 14:10:00
RUSSIAN SANCTIONS FOR GERMANY
Moscow has imposed sanctions on the owner of the Polish part of the Yamal pipeline that carries Russian gas to Europe, as well as Gazprom's former German unit, whose subsidiaries help meet Europe's gas consumption.
RUSSIA SANCTIONS $285 BLN
2022, May, 11, 11:05:00
EUROPEAN ENERGY PLAN $205 BLN
The EU wants to combine faster deployment of renewables, greater energy savings, diversification of supplies from international partners and new tools to accelerate investment in a bid to replace coal, oil and natural gas from Russia following the country’s invasion of Ukraine.
RUSSIA SANCTIONS $285 BLN
2022, April, 28, 14:05:00
EUROPE PLAN TO PAY IN RUBLES
Gas distributors in Germany, Austria, Hungary and Slovakia are planning to open rouble accounts at Gazprombank in Switzerland in order to satisfy a Russian requirement for payments in its own currency
RUSSIA SANCTIONS $285 BLN
2022, March, 15, 15:15:00
RUSSIAN SANCTIONS FROM EUROPE
The European Commission said in a statement on Tuesday that the sanctions included "a far-reaching ban on new investment across the Russian energy sector".
All Publications »
Tags: RUSSIA, SANCTIONS, OIL, GAS, EUROPE
Chronicle:
RUSSIA SANCTIONS $285 BLN
2022, August, 12, 08:44:00
6TH ANNUAL LNG SUMMIT USA
The 6th Edition of Wisdom’s Much Acclaimed Annual LNG Summit Will Be Held Live in Houston - PREPARING THE INDUSTRY FOR THE RISE IN DEMAND FOR LNG
RUSSIA SANCTIONS $285 BLN
2022, August, 12, 08:43:00
2022 SAUDI PIPELINES INTERNATIONAL CONFERENCE & EXIBITIONS
Eventat Co (a Saudi local company) is hosting the first-ever “2022 Saudi Pipelines International Conference & Exhibitions” from 4-6 October, 2022 at the Dhahran Expo, Dammam (Eastern Province), Kingdom of Saudi Arabia. The three-day conference and exhibition are dedicated to bringing together over “50+ Regional/International speakers, 100+ Sponsors/Exhibitors, 1000+ Delegates and 3000+ Visitors” from around the globe who carry significant interest in enhancing the pipelines lifecycle for the current and future.
RUSSIA SANCTIONS $285 BLN
2022, August, 12, 08:42:00
9TH INTERNATIONAL LNG CONGRESS LNGCON 2023
9th International LNG Congress (LNGCON 2023) 6-7 March, 2023 Link to the Congress website: https://bit.ly/3tXVmr7
RUSSIA SANCTIONS $285 BLN
2022, August, 12, 08:40:00
GERMANY'S HARD WINTER
With nearly half of German homes relying on gas for heating, the country faces potential rationing if it fails to secure sufficient reserves.
RUSSIA SANCTIONS $285 BLN
2022, August, 12, 08:35:00
LIMITED RUSSIA SANCTIONS
Russian oil production in July was only 310,000 b/d below prewar levels, a fall of less than 3 per cent, while total oil exports were down about 580,000 b/d, according to the IEA’s latest monthly oil report.
RUSSIA SANCTIONS $285 BLN
2022, August, 12, 08:30:00
BRITAIN'S HARD WINTER
Under the government’s latest “reasonable worst-case scenario,” Britain could face an electricity capacity shortfall totaling about a sixth of peak demand, even after emergency coal plants have been fired up, according to people familiar with the government’s planning.
RUSSIA SANCTIONS $285 BLN
2022, August, 12, 08:25:00
GLOBAL LNG UNCERTAINTY
The money lost is dwarfed by enormous profits both BP and Shell recorded this year on the back of soaring refining margins and high oil and gas prices.
All Publications »