Russia is losing €160 million per day due to Western sanctions on oil, new report says

 the sale of fossil fuels is Russia's main source of revenue, representing over 40% of its federal budget.
the sale of fossil fuels is Russia's main source of revenue, representing over 40% of its federal budget. Copyright Alexey Danichev/Copyright 2022 Sputnik
Copyright Alexey Danichev/Copyright 2022 Sputnik
By Jorge Liboreiro
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A new report gives a clearer picture of the double impact inflicted on Russia by the EU's oil embargo and the G7's price cap.


Russia, the world's largest exporter of oil, is losing an estimated €160 million per day due to the combined impact of the European Union's far-reaching oil embargo and the G7's price cap, according to a new report.

The economic losses could mount all the way up to €280 million per day after 5 February, the deadline the EU imposed on its 27 member states to phase out all seaborne imports of refined petroleum products, such as naphtha and gasoil.

Russia now earns €640 million per day – down from €1,000 million per day in March – from the sale of all fossil fuels, which are believed to represent around 40% of its federal budget and act as a financial lifeline to bankroll the increasingly costly war in Ukraine.

The findings were released on Wednesday by the Centre for Research on Energy and Clean (CREA), an independent research organisation based in Helsinki, and are poised to help quell the dissenting voices that have blasted Western sanctions as ineffective and counterproductive.

"The EU’s oil ban and the oil price cap have finally kicked in and the impact is as significant as expected," Lauri Myllyvirta, lead analyst at CREA, said in a press release.

A spokesperson from the European Commission declined to comment on the report, simply saying "we'll let it speak for itself."

However, the Kremlin expressed scepticism and said it was too early to draw conclusions about economic losses. "As far as the losses are concerned, no one has especially seen the caps yet," spokesperson Dmitry Peskov told reporters, as quoted by Reuters.

The calculation from CREA takes into account the double whammy inflicted by the EU's embargo — which affects its domestic market — and the G7's price cap, which has worldwide implications. The group is composed of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

As part of the embargo, widely considered the bloc's most radical sanction to date, EU countries agreed to gradually get rid of all seaborne imports of Russian oil and refined products.

Oil imports through pipelines were controversially exempted at the request of Central European countries, although Germany and Poland agreed to weed them out of their own volition.

Still, the vast majority of the EU's purchases of Russian oil were traded by sea, making the embargo an economic decision with sweeping consequences.

The bloc did away with all seaborne imports of crude oil on 5 December, the same day the G7 introduced its own price cap, which allows the provision of key services, including financing, insurance and shipping, to Russian tankers that sell crude oil at a maximum price of $60 (€56) per barrel.

Exceeding that limit immediately triggers a prohibition to provide services.

The price range chosen by the G7, which originated from protracted negotiations between EU countries, is not fixed in stone and can be revised according to market trends.

The $60-per-barrel range was initially criticised by some leaders and analysts for being too low, given that Russia had been selling its Urals oil at an artificially discounted price compared to the Brent benchmark.

In the first days of 2023, the Urals price has continued falling, reaching $51 per barrel, a far cry from the $95 seen right before the Kremlin launched the invasion of Ukraine. 

The experts at CREA believe that lowering the G7's price cap to a more aggressive range between $25 and $35 per barrel, as Poland and the Baltic countries pushed for during EU talks, could slash Moscow's oil revenues by "at least" €100 million per day, on top of the existing losses.

"It's essential to lower the price cap to a level that denies taxable oil profits to the Kremlin," Myllyvirta said.


The report, which tracked daily movements of cargo ships, shows Russia has made €3.1 billion from crude vessels supposed to be covered by the G7 cap, providing the central government with €2 billion in tax income.

"This tax income can be eliminated almost completely by revising the price cap to a level that is much closer to Russia's costs of production," the report reads.

Due to the opacity of the Russian economy, it's unclear how much money Moscow needs to make in order to recoup all production and transport costs and therefore be willing to keep selling its oil to global markets.

A pre-war estimate by International Monetary Fund (IMF) suggested a break-even price between $30 and $40 per barrel. "It is plausible that the sanctions introduced since the start of the war have significantly increased (these costs)," an IMF spokesperson told Euronews last month.

In order to further cripple Russia's war machine, the experts recommend strengthening the price cap's implementation and introducing similar measures for the import of pipeline gas and liquefied natural gas (LNG).


In December, the report says, the EU remained the largest buyer of Russian oil and Russian pipeline gas, and was the second biggest purchaser of Russian LNG after Japan.

However, once the domestic embargo fully kicks in on 5 February, the bloc is expected to fall down the list and be replaced by China and India as Russia's top oil clients.

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