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Russian oil price cap reduced Kremlin's revenues by 34 billion euros

Russian oil price cap reduced Kremlin's revenues by 34 billion euros The Kremlin lost 34 billion euros in oil revenues over the year (Getty Images)
Author: Maria Kholina

The price cap on Russian oil, set at $60 per barrel in December of last year, has reduced Kremlin's revenues by 14%. However, the impact began to weaken in the second half of 2023, according to the Center for Research in Energy and Clean Air (CREA).

Analysis indicates that over the past year, the price cap has cost the Kremlin €34 billion in export revenues, roughly equivalent to about two months' worth of income.

"That impact though is far short of what could have been achieved," the report states. "Sanctions have not reduced the Kremlin’s resolve for war one year on."

CREA's analysis shows that sanctions significantly affected oil export revenues in the first half, reaching peak losses of €180 million per day in the first quarter. Overall revenues from fossil fuels decreased, with only crude oil experiencing a 25% drop.

However, Russia was able to mitigate the consequences in the second half due to the inability to enforce, strengthen, and consistently monitor the price limitation. Income losses reduced to €50 million per day in the second and third quarters, then rebounded to €90 million per day in the final quarter of the year.

Effectiveness of sanctions

The effectiveness of sanctions declined due to inadequate monitoring and compliance with the oil price limitation policy, allowing Russia to sell its oil at prices higher than the established limit, note the authors.

In addition, a "refining loophole" legally allows oil products produced from Russian crude oil to enter countries imposing sanctions and Russia has also capitalised on derogations provided to countries in the EU that import cheap Russian crude and sell their refined products to the EU as well as to other regions globally.

The increased use of "shadow" tankers by Russia to transport its oil also reduces the impact of price limitations and increases the price at which they can export their oil, which is another blow to the impact of sanctions, according to CREA.

Earlier, U.S. Treasury Secretary Janet Yellen stated that Washington is preparing to take harsh measures for violations of the established oil price cap.

Furthermore, the U.S. government intends to halve Russia's oil and gas export revenues by 2030.