By John Q. Hosedrinker 
According to Vladyslav Vlasiuk, Ukraine’s Commissioner for Sanctions Policy, sanctions against Rosneft and Lukoil imposed by the US and UK, and Rosneft by the EU, could drastically impact Russia’s oil revenue. These sanctions may cause Russia to lose over half of its oil exports to India and China, potentially costing them approximately $100 billion annually. The enforced restrictions could lead to a loss of 60-70% of oil exports, which translates to a monthly loss of at least $5 billion, representing roughly half of Russia’s current oil revenue.
Read the original article here
Half revenue gone: Zelenskyy’s office explains how oil sanctions to hit Russia, and it sounds like a significant blow is coming. The core of the matter is that these sanctions, if effectively implemented, could slice around $100 billion a year from Russia’s income. That’s a staggering amount, essentially crippling their ability to fund the war in Ukraine. The focus here is firmly on oil, a cornerstone of Russia’s economy and, crucially, a source of hard currency.
Considering Russia’s relationship with major players like India and China, there’s a certain “if” factor at play. The article highlights that, if the sanctions are truly biting, Russia could lose between 60% and 70% of its oil exports to these two countries. Of course, the effectiveness of the sanctions hinges on how well they are enforced and the willingness of other nations to cooperate. The mention of satellite tracking of the “shadow fleet” suggests that the West is actively monitoring Russia’s attempts to circumvent the restrictions.
Ukraine’s ongoing attacks on Russian oil refineries and depots are another critical factor. These strikes are systematically targeting the infrastructure that keeps Russia’s oil machine running. This is a very important point since this type of action can make a real difference in the field.
The domestic fuel situation in Russia is likely to become increasingly dire. People need transportation, and food and supplies need to move. A crippled fuel supply could quickly translate into economic hardship. It’s a point of vulnerability that the sanctions and the strikes on refineries are specifically designed to exploit.
The article also touches upon the ongoing discourse around the Russian economy, which is a bit of a mixed bag. The discussion considers the long view, noting that these situations don’t lead to overnight collapse and that Russia had a long time to prepare for this. The long game matters; that’s when pressure builds and effects are noticed. It also mentions an important truth: that despite claims of impending collapse, Russia can hold out for a while.
Focusing on the immediate effects, India’s actions are relevant. Reports suggest that India is starting to decrease its purchases of Russian oil. The influence of the United States on nations like India is an important factor. It’s all about how much the US can lean on China and India to help out. If the US can do this, it makes the sanctions far more potent.
China’s role is also complicated. Private refiners in China may scale back imports to avoid complications and maintain their market position. State-owned entities, however, will probably continue importing oil for domestic use. The picture is not as clear-cut as it might seem. The Russian economy is experiencing labor shortages, and that is a problem that does not go away without investment and time.
The problems of Russia’s infrastructure is also highlighted. The rail networks are congested, and bottlenecks hinder economic activity, and that is before we even mention a limited number of railcars. Shipping, too, has been significantly affected by Ukrainian strikes on oil terminals and ports. This infrastructure is crumbling. The sanctions are also making the “grey fleet” – the shadowy network of tankers used to transport Russian oil – increasingly difficult to operate.
Russia is even selling oil products at a loss to India because they’re short on refined product. The damage to their key infrastructure is a huge problem. Russia may face the same outcome that occurred with oil infrastructure with their energy infrastructure. The attacks are having a serious, detrimental impact.
Russia has several hurdles. While it is possible for Russia to come back from this, it requires success in Ukraine. They are also trying to compensate for lost equipment by ramping up drone production. The situation with the sovereign wealth fund is also very clear. They have been burning through a great deal of money. Their fund has diminished to about $110 billion. The Kremlin has announced a complete ban on petroleum exports and partial diesel export bans and there is a possibility that both could become complete bans.
If the oil refineries can’t resume production, Russia’s sovereign wealth fund will be depleted within a year. Ukraine has even started targeting gas delivery pipelines, which will further cut down on Russian income.
To try and counter these economic strains, Putin announced an increase in the VAT tax. GDP growth is tied directly to military manufacturing, but that is a waste of resources because this manufactured material is then destroyed in Ukraine.
Inflation is at around 10%, and that’s on top of a 20% interest rate. If fuel shortages push up prices, inflation will accelerate. The Russian economy is in distress, although Russia can sustain this situation longer if the pressure doesn’t keep increasing.