Russian Foreign Minister Sergei Lavrov predicted on June 4 that sanctions would not affect oil exports, but profits this year would even skyrocket.
According to Sergei Lavrov, Western sanctions will not affect the country's oil exports. "If we look at the prices that have been set after Western policies, we don't have a budget loss. On the contrary, this year's profit will increase significantly from the export of energy sources”, he said.
Last week, EU leaders agreed to ban two-thirds of oil imports from Russia. "The European Union can now complete a ban on 90% of Russia's oil imports by 2023. This is an important step. We will soon return to the matter with the remaining 10%", European Commission President Ursula von der Leyen said.
But for Lavrov, oil in general is not an object of politics. "There's still demand for it, we have alternative sales markets where sales have been and are growing," he said.
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| Oil pipeline in Ust-Luga, Russia. Photo: Reuters |
Bloomberg Economics estimates that, even if some countries stop or eliminate energy purchases, Russia's oil and gas revenues will reach about $285 billion this year. This result will surpass 2021 by more than 1/5.
According to the International Energy Agency, revenue from Russia's oil exports increased by 50% year-on-year in 2021. In the first quarter of 2022, Russia's top oil producers have posted their highest profits in nearly a decade, according to estimates by Moscow-based SberCIB Investment Research.
One of the major loopholes in sanctions against Russia is the willingness of other countries to continue buying oil, despite demanding high discounts. Indian refiners have bought more than 40 million barrels of Russian oil since the Ukraine crisis erupted.
According to calculations by Bloomberg, this figure is 20% higher than the Russian-Indian oil flow for the whole year of 2021. Refiners are looking for private deals rather than public tenders to sell Russian barrels below market price. China is also strengthening its energy links with Russia, buying its oil as the West shuns.
"Much of the world is not engaged in the imposition of sanctions. Trade will continue, demand for fuel will be," Wouter Jacobs, founder and director of the Erasmus Merchandise & Trade Center at Erasmus University in Rotterdam, said. According to him, buyers in Asia or the Middle East will increase.
When it comes to gas, Russia has fewer options to redirect customers. However, buyers from gas pipelines also depend heavily on them. About 40% of the EU's gas needs are met by Russia, and this will be the bloc's hardest link to break.
Gas supplies to Europe even spiked in February and March. Since then, output has fallen due to warmer weather and record liquefied natural gas flows from the US and other countries. However, even if the EU wants to reduce its dependence, the reality is complicated. Some of Russia's major gas customers are still trying to keep buying fuel. Companies such as Eni SpA (Italy) and Uniper SE (Germany) are expected to continue importing Russian gas.
Even so, the Russian energy sector is also facing a number of challenges, from transportation and insurance restrictions to weak domestic demand. Oil production could fall by more than 9% this year, while gas output could fall by 5.6%, according to forecasts by the Russian Economy Ministry.
"In the Kremlin there is some optimism and even surprise that the Russian economy has not collapsed in the face of the onslaught of sanctions. But if we look beyond two to three years There are many questions about how the energy and manufacturing sectors will continue, said Tatiana Stanovaya, founder of political consulting firm R.Politik.
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