EU oil ban axes £140 MILLION a day to Putin’s war chest

Viktor Orban ally slams EU oil embargo on Russia

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The European Union’s ban on all oil imports from Russia has delivered a blow to Vladimir Putin’s war chest, with Russia’s oil revenues expected to drop by £140 million a day until February, an independent research organisation has found. When the price cap on Russian oil comes into place in February, the sanctions will drain Russia’s war funds by £248 million a day. The report’s findings by the Centre for Research on Energy and Clean Air (CREA) shut down the Kremlin’s narrative that international sanctions have no significant toll on Russia’s economy.

Since Putin’s unprovoked invasion of Ukraine, dozens of Western countries have responded by turning Russia into the world’s most sanctioned nation.

Some of the most significant sanctions include removing several major Russian banks from the SWIFT payment clearing network, freezing Russian assets in foreign countries, restricting imports of Russian oil, and cutting off key exports to Russia like high-tech components and microchips.

As a result, Russia’s Gazprom energy exporter has seen its exports drop by almost 46 percent in 2022, as it lost access to the EU’s energy market.

Jonathan Stern, a senior research fellow at the Oxford Institute for Energy Studies, told the leading Natural Gas Intelligence news provider: “Gazprom will not be able to find any substantial new export outlets over the next decade.”

In a dire assessment of Russia’s energy resilience, he added: “Nothing will compensate for the loss of 140-150 Bcm of pipeline export volumes to European Union (EU) countries any time soon.”

Gazprom chief Alexey Miller himself admitted the energy exporter had a “very, very difficult year” in 2022, reports say, as the company’s gas production declined by 20 percent compared to 2021.

After threatening Europe with cutting off gas supplies, Gazprom cut gas flows to Europe to a trickle. It was followed by an explosion that knocked out the Nord Stream pipelines running from Russia to Germany, bringing gas deliveries close to zero.

The only Russian gas deliveries left are now limited to two cross-border pipelines across Ukraine and Turkey.

Russia is now pinning its hopes on China with a new pipeline project that started deliveries to China in 2019. Kremlin officials say Russia supplied China with about 10 billion cubic meters (bcm) of gas in 2021 and hope to reach its full 38 bcm capacity by 2025 – it still falls far short of the annual 155 bcm of gas it provided to the EU before the war.

Asked whether economic sanctions on Russia are effective, Edward Fishman, who led the US’s sanctions policy after Russia invaded Crimea in 2014, said: “The short answer is yes.”

Jim O’Brien, who is now coordinating US sanctions against Russia, said: “Our sanctions are constraining Russia’s ability to develop, produce, maintain, and buy weapons; to replace key components for his war fighting equipment, and to sustain the pace of his efforts.

“We understand that for Putin, this is not just about one attempted conquest. He has embarked on an imperial project, and we are limiting his ability to wage war, now and in the future.”

Despite the economic sanctions, the EU remained the largest importer of Russian oil in December 2022, the report finds. But this has changed now that Germany has stopped importing Russia pipeline oil at the end of December and that the EU imposes a price cap on Russian oil from February.

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According to Russia’s finance ministry, the country’s energy will jump from $244 billion last year in 2021 to $338 billion in 2022 due to higher exports and prices.

The upcoming price cap on Russian oil, imposed by G7 countries, including Britain, will potentially push Moscow’s budget deficit higher than the expected two percent next year, Russian Finance Minister admitted.

Britain and its allies should revise the current $60 price cap and bring it down to $25-35 to hit Putin’s war chest, the CREA report recommends.

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