By Vaibhav Raghunandan, Europe-Russia Analyst and Research Writer
G7 and EU sanctions on Russian crude oil reduce their export revenues by 10% in the second year of implementation
Key findings
Russia’s monthly fossil fuel export revenues dropped 2% to EUR 611 mn per day in November.
In November, Russia’s monthly export revenues from pipeline gas saw a 23% month-on-month growth, to EUR 78 mn per day.
The EU and G7 import ban on Russian oil and the price cap policy have cost Russia an estimated EUR 4 bn in lost Urals crude export revenue, lowering export earnings by 10% in the second year of the sanctions.
This impact was felt heavily for the first half of 2024 when Russian revenues were slashed by EUR 2.5 bn, but the effects have dropped steadily throughout 2024.
India’s imports of Russian crude oil dropped by a massive 55% in November — the lowest figure since June 2022.
France, the second-largest buyer within the EU, imported Russian LNG worth EUR 252 mn in November. While there was a 15% month-on-month drop in France’s total imports of LNG, Russian imports grew by 4%.
In November, there was a 17% month-on-month increase in the discount on Urals grade crude oil to an average of USD 6.01 per barrel compared to Brent crude oil.
A lower price cap of USD 30 per barrel (still well above Russia’s production cost, which averages USD 15 per barrel) would have slashed Russia’s oil export revenue by 25% (EUR 74 bn) from the start of the sanctions until the end of November 2024. A USD 30 per barrel price cap would have slashed Russian revenues by 23% (EUR 2.58 bn) in November alone.
Trends in total export revenue
In November, Russia’s monthly fossil fuel export revenues dropped 2% to EUR 611 mn per day.
Revenues from seaborne crude oil (EUR 200 mn per day) dropped by 6% month-on-month. There was a direct link to a similar 5% month-on-month drop in the volume of exports.
Revenues from crude oil via pipeline (EUR 64 mn per day) dropped by a marginal 2% in November.
There was no month-on-month change in Russian revenues from seaborne oil product exports or LNG in November, with volumes also remaining almost the same as the prior month for both commodities.
There was a significant 23% month-on-month rise in Russian revenues from pipeline gas, to EUR 78 mn per day. Pipeline gas volumes also saw a 20% rise, to their highest levels since February, due in part to seasonal changes in consumption. Cold weather in Europe has increased heating usage, and with low wind speeds in Northern Europe reducing renewable energy supply has increased demand for gas.
Russian revenues from coal exports continued to slide in 2024, dropping by 23% month-on-month to EUR 44 mn per day.
Measuring the impact of the second year of crude oil sanctions
In an attempt to restrict funds for Russia’s war machine, EU/G7 countries put an embargo on Russian crude and introduced a USD 60 per barrel price cap in December 2022. Over the next 12 months, the price cap and embargo had a significant impact on revenues, and forced Russia to find new markets and ways to transport its oil. Russia did this by offering deep discounts on its Urals grade crude. It has been two years since the imposition of the price cap. CREA estimates that in this period, the sanctions have forced Russia to drop the price of Urals by an estimated 15%. Since the sanctions, Russia has lost an estimated EUR 14.6 bn in revenues from Urals grade crude exports. In the second year of the sanctions, CREA estimates that sanctions impacted Russian Urals crude revenues by 10% resulting in losses of EUR 4 bn. This impact was felt heavily for the first half of 2024 when Russian revenues were hit by EUR 2.5 bn. The price cap has had an impact but has failed to live up to its potential. A lack of enforcement and desire to lower the price cap has meant Russia has found a way to circumvent the cap and find new markets as time has gone by, especially in the second year of the sanctions. In the first year of the sanctions Russia was losing, on average, 23% of its Urals crude export revenues every month due to the price cap and embargo. This figure has fallen sharply to a mere monthly average of 9% in the second year of the cap. The impact has reduced steadily through 2024 — the effect on revenues in October was 63% lower than that in January. As Russia has built a network of ‘shadow’ tankers, it can trade its oil above the cap to new markets in non-sanctioning countries.
Who is buying Russia’s fossil fuels?
Coal: From 5 December 2022 until the end of November 2024, China purchased 46% of all Russia’s coal exports — India (17%), Turkey (11%), South Korea (10%), and Taiwan (5%) round off the top five buyers list.
Crude oil: China has bought 47% of Russia’s crude exports, followed by India (37%), the EU (6%), and Turkey (6%).
Oil products: Turkey, the largest buyer, has purchased 25% of Russia’s oil product exports, followed by China (12%), and Brazil (11%).
LNG: The EU was the largest buyer, purchasing 48% of Russia’s LNG exports, followed by China (22%), and Japan (18%).
Pipeline gas: The EU was the largest buyer, purchasing 40% of Russia’s pipeline gas, followed by China (28%), and Turkey (26%).
China remained the largest buyer of Russian fossil fuels in November, accounting for 40% (EUR 5 bn) of Russia’s monthly export earnings from the top five importers. Crude oil comprised 70% (EUR 3.5 bn) of China’s imports from Russia. There was an 18% month-on-month drop in Russian revenues from exports to China in November. The brunt of this was due to a significant drop in export revenues from oil products (-44%) and LNG (-32%).
Turkey became the second highest importer of fossil fuels from Russia in November contributing 24% (EUR 3 bn) to Russia’s monthly export earnings from its top five importers. Turkey’s imports also saw a 12% month-on-month increase — chiefly due to a massive 132% surge in imports of pipeline gas.
Turkey’s dependence on Russian gas has led to it seeking a sanctions waiver from the US which allows it to pay Gazprombank for its imports. The US imposed sanctions on Gazprombank in mid-November, curtailing its ability to seek payments for energy trades.
In a significant shift, India dropped to third in the list of largest buyers of Russian fossil fuels in November, contributing 17% (EUR 2.1 bn) to Russia’s monthly export earnings from its top five importers. There was a significant 22% drop in Russian revenues from crude oil exports to India in November.
While there was an 11% month-on-month decline in the volume of India’s imports of crude oil in November, Russian volumes suffered the most, dropping by a massive 55%. India’s November imports of crude from Russia were the lowest since June 2022. As the discount on Urals crude has narrowed, private refineries (some of which also capitalise on the refining loophole) have cut imports from Russia.
The EU was the fourth largest buyer of Russian fossil fuels in November, their imports accounting for 15% (EUR 1.8 bn) of the top five purchasers. Pipeline gas comprised the largest share of the EU’s purchases of Russia’s fossil fuels (46%), followed by LNG (34%).
Brazil bought EUR 15 mn of Russian fossil fuels in November, which consisted entirely of oil products.
In November, the five largest Russian fossil fuel importing countries in the EU paid Russia a total of EUR 1.1 bn for their imports. The EU has granted an exemption for Russian crude oil imported through the southern branch of the Druzhba pipeline to Hungary, Slovakia, and the Czech Republic. Russian pipeline gas and liquified natural gas (LNG) also remain unsanctioned.
Slovakia was the largest importer of Russian fossil fuels within the EU, with imports totalling EUR 261 mn. Slovakia’s imports consisted of crude oil (EUR 132 mn) and gas (EUR 129 mn) via pipeline.
France, the second-largest buyer within the EU, imported Russian LNG worth EUR 252 mn in November. While there was a 15% month-on-month drop in France’s imports of LNG, Russian imports grew by 4% and comprised over a third of the total.
Hungary, the third-largest buyer within the EU, imported pipeline oil worth EUR 108 mn and gas worth EUR 141 mn.
Austria imported pipeline gas worth EUR 187 mn in November and Spain imported EUR 176 mn of Russian LNG.
How are oil prices changing?
In November, the average Urals spot price saw a 2% reduction but remained above the price cap, trading at USD 67.91 per barrel.
The price of the East Siberia Pacific Ocean (ESPO) and Sokol blends of Russian crude oil, primarily associated with sales to Asian markets, decreased by a marginal 1% in November.
In November, there was a 17% month-on-month increase in the discount on Urals grade crude oil to an average of USD 6.01 per barrel compared to Brent crude oil.
The discount on the ESPO grade narrowed by a massive 15% and was traded at an average discount of USD 3.88 per barrel while that on the Sokol blend narrowed by 2% to USD 6.65 per barrel.
Throughout this period, vessels owned or insured by the G7+ countries continued to load Russian oil in all Russian port regions where average exported crude oil prices remained above the price cap level. These cases call for further investigation by enforcement agencies for breaches of sanctions.
Growth of ‘shadow’ tankers reduces G7+ shipping industry’s leverage over Russia
In November, 35% of Russian seaborne crude oil and its products were transported by tankers subject to the oil price cap. The remainder was shipped by ‘shadow’ tankers and was not subject to compliance with the oil price cap policy.
80% of the total volume of Russian seaborne crude oil was transported by ‘shadow’ tankers, while tankers owned or insured in countries implementing the price cap accounted for 20% of the total value of Russian crude exported in November.
‘Shadow’ tankers transporting oil products handled 40% of Russia’s total volume of products. The remaining volume was shipped by tankers subject to the price cap policy.
‘Shadow’ tankers pose significant risks to ecology & impact of sanctions
In November 2024, 369 vessels exported Russian crude oil and oil products, of which 206 were ‘shadow’ tankers. 28% of these ‘shadow’ tankers were at least 20 years old.
Older ‘shadow’ tankers transporting Russian oil and petroleum products across EU Member States’ exclusive economic zones, territorial waters, or various maritime straits raise environmental and financial concerns due to their age, questionable maintenance records, and insurance coverage. Their insurance coverage potentially lacks sufficient protection & indemnity (P&I) insurance to cover the cost in the event of an oil spill or catastrophe. In the case of accidents, coastal countries may bear the financial brunt of the cleanup, not to mention the repercussions of damage to their marine ecology.
The cost of clean up and compensation resulting from an oil spill from tankers with dubious insurance could amount to over EUR 1 bn for the coastal country’s taxpayers.
In November, EUR 201 mn of Russian oil underwent ship-to-ship (STS) transfers in EU waters, a sharp 31% reduction from the prior month.
63% of these transfers were facilitated by tankers covered by G7+ insurance. STS transfers of Russian oil severely undermine sanctions by allowing Russia to evade sanctions and price caps by splitting the cargo to multiple buyers and mixing lower-priced Russian oil with non-Russian oil.
‘Shadow’ tankers, with an average age of 17, conducted environmentally dangerous ship-to-ship transfers totaling EUR 74.7 mn in EU waters.
How can Ukraine’s allies tighten the screws?
Russia’s fossil fuel export revenues have fallen since the sanctions were implemented, subsequently constricting Putin’s ability to fund the war. However, much more should be done to limit Russia’s export earnings and constrict the funding of the Kremlin’s war chest. This includes lowering the oil price cap, increasing monitoring and enforcement of sanctions, and banning unsanctioned fossil fuels such as LNG and pipeline fuels that are legally allowed into the EU.
Lowering the oil price cap
A lower price cap of USD 30 per barrel (still well above Russia’s production cost, which averages USD 15 per barrel) would have slashed Russia’s oil export revenue by 25% (EUR 74 bn) from the start of the sanctions in December 2022 until the end of November 2024. A USD 30 per barrel price cap would have slashed Russian revenues by 23% (EUR 2.58 bn) in November alone.
Lowering the price cap would be deflationary, reducing Russia’s oil export prices and inducing more production from Russia to make up for the otherwise drop in revenue.
Since introducing sanctions until the end of November 2024, thorough enforcement of the price cap would have cut Russia’s export revenues by 8% (EUR 24.58 bn). In November 2024 alone, full enforcement of the price cap would have cut down revenues by 6% (approximately EUR 0.65 bn).
Restrict the growth of ‘shadow’ tankers & plug the refining loophole
Russia’s reliance on tankers owned or insured in G7+ countries has fallen due to the growth of ‘shadow’ tankers. This subsequently impacts the coalition’s leverage to lower the price cap and hit Russia’s oil export revenues. Sanctioning countries must prevent Russia’s growth in ‘shadow’ tankers that are immune to the oil price cap policy.
G7+ countries must also plug the widening refining loophole by banning the importation of oil products produced from Russian crude oil. This would enhance the impact of the sanctions by disincentivising third countries from importing large amounts of Russian crude and helping cut Russian export revenues. Banning the imports of oil products from refineries that process Russian crude oil would also lower the price of Russian oil as they would struggle to find buyers or expand their market.
Stronger enforcement & monitoring
Enforcement agencies overseeing the sanctions must take proactive measures against violating entities, including insurers registered in price cap coalition countries, shippers, and vessel owners.
Despite clear evidence of violations, agencies must do more to enforce penalties against shippers, insurers, or vessel owners, and this information must be shared widely in the public domain. Penalties against violating entities increase the perceived risk of being caught and serve as a deterrent.
Penalties for violating the price cap must be significantly harsher. Current penalties include a 90-day ban on vessels from securing maritime services after violating the price cap, a mere slap on the wrist. If found guilty of violating sanctions, vessels should be fined and banned in perpetuity.
Sanctions enforcement bodies must continue to sanction ‘shadow’ tankers as doing so hinders Russia’s ability to transport its oil above the price cap. CREA estimates that the Office of Foreign Assets Control (OFAC)’s initial sanctioning of ‘shadow’ tankers widened the discount that Russia offered buyers of its oil and cut Russia’s crude oil export revenues by 5% (EUR 512 mn per month).
The lack of proper monitoring and enforcement and rising oil prices have increased Russia’s export revenues to fund its war against Ukraine.
The G7+ countries should ban STS transfers of Russian oil in G7+ waters. STS transfers undertaken by old ‘shadow’ tankers with questionable maintenance records and insurance pose environmental and financial risks to coastal states and support Russia in logistically exporting high volumes of crude oil. Coastal states should require ‘shadow’ tankers transporting Russian oil through their territorial waters to provide documentation showing adequate maritime insurance. If ‘shadow’ tankers fail to do so, they should be added to the OFAC, UK, and European sanctions list. This policy could limit Russia’s ability to transport its oil on ‘shadow’ tankers, exempt from complying with the oil price cap policy.
Relevant reports:
**Note on methodology:**Update 2023-10-19 – We now use Kpler to estimate seaborne exports from Russia and other countries. This change increases our tracker’s estimate of exports from Russia to the world by EUR 77.8 bn (+18% increase) and the exports to the EU by EUR 12.4 bn (+2.8% increase).We have also changed how we receive protection and indemnity (P&I) insurance information about ships to obtain data directly from known P&I providers and Equasis. This ensures we have recorded the correct start date for a ship’s insurance.Find out more details on the changes in our methodology, which are explained in our article about the migration from automatic identification system (AIS) data providers to the Kpler dataset.The data used for this monthly report is taken as a snapshot at the end of each month. The data provider revises and verifies data on trades and oil shipments throughout the month. We subsequently update this verified data each month to ensure accuracy. This might mean that figures for the previous month change in our updated subsequent monthly reports. For consistency, we do not amend the previous month’s report; instead, we treat the latest one as the most accurate data for revenues and volumes.Calculating the impact of sanctions: We estimated the impact of the EU/G7 crude oil ban and price cap by estimating the price of Urals in the absence of the cap and Russia’s invasion of Ukraine. We do this by first calculating the average difference between the spot prices of Brent and Urals in the year before the invasion. This average difference is used to estimate an expected price of Urals based on the current value of Brent since the start of the price cap. We use this expected price of Urals and the current price of Urals, along with the volumes of Urals traded from Kpler, to estimate the difference in the total value of Russia’s exports.
‘G7+’ refers to the G7 countries, EU member states, Australia, Norway, and Switzerland that all implement the oil price cap policy.