By Matt Underwood Russia’s oil ghost fleet circles the oceans as buyers vanish, a situation that paints a grim picture of the current economic reality. It’s becoming increasingly clear that the war in Ukraine is taking a devastating toll on Russia’s financial resources, and the oil trade, a crucial lifeline for the Russian economy, is facing unprecedented challenges. The “ghost fleet,” those tankers supposedly carrying Russian crude, is now navigating increasingly choppy waters, and the primary reason for this is a shrinking market for Russian oil. Many buyers are simply steering clear, whether due to sanctions, reputational concerns, or the simple fact that the economics no longer make sense.
The financial strain is already biting deep into Russia’s ability to wage war. The early stages of the conflict saw Russia relying on existing stockpiles of weapons and saved funds. However, those reserves are dwindling. To replace lost equipment or build new tanks, armored vehicles, and artillery requires a tremendous amount of money that Russia just doesn’t have. This financial pressure is directly reflected on the battlefield. The lack of proper equipment, lower artillery fire rates and the reduced offensive capabilities are all a direct consequence. We see Russia struggling to take territory, and when they do, it takes significantly longer than it used to.
The impact of this economic drain is far-reaching. The war’s high cost combined with the loss of its primary source of income is pushing Russia into a precarious economic situation. While Russia might not experience a sudden collapse, the gradual erosion is evident. Inflation is likely to worsen, the Russian army is becoming less well-equipped, and Russian businesses are increasingly likely to struggle. The emergence of a gray economy, with illicit financial activity becoming a significant part of the economic fabric, is also predictable.
This situation isn’t just about a lack of money; it’s about the fundamental erosion of Russian power. The longer the war continues, the worse it gets. The decline started a while ago, and is likely to take decades to fully show the results. It’s a long-term problem with consequences that will shape Russia for years to come. In the short term, this decline will likely affect the fighting in Ukraine.
It is worth noting that the consequences of this financial and economic pressure are not necessarily going to lead to mass protests and immediate political change. Instead, it seems we’ll see a slow burn, a gradual descent into a situation resembling the 1990s, when economic turmoil and uncertainty were rampant. The Russian military, in its current state, will struggle to generate combat power and achieve its goals. This does not mean the war will stop, in any way, shape, or form.
However, the question does arise: is Russian oil truly unsaleable? It is important to note that even with sanctions and boycotts, it’s not a complete shutdown. There are reports of some buyers still purchasing Russian oil, often through complex and convoluted arrangements, and even reselling it at a profit. Also worth mentioning, that a significant portion of Germany’s fuel supply, for example, comes from a refinery owned by the Russian company Rosneft. It is a messy situation that is not easily sorted.
The situation is serious, but it is not a simple case. Russia is trying to invade a smaller country, and the war is a massive financial burden. While it’s true that the Russian economy and military are facing real and severe challenges, it’s also true that Russia has allies and is not completely isolated. The world can expect that Russia will find new ways to stay in the game, and the impact may well be felt for years to come.
Also, it may not be useful to think about a moment when Russia just “runs out” of cash. Instead, picture a gradual process of decline. The military’s effectiveness will diminish. The Russian economy will likely continue to experience difficulties. And the country will likely become more and more like the 1990s.