Oil and gas: Russia reaps record revenues

L'arrêt total des livraisons de gaz via Nord Stream 1 se traduit bien par un recul des revenus de Gazprom, car la hausse des prix constatée depuis lundi n'est pas suffisante pour compenser la chute des volumes.

Posted Sep 6, 2022 11:14 AMUpdated on Sep 6, 2022 at 5:51 PM

Despite sanctions and the prospect of embargoes, Russia continues to massively export its energy raw materials, a crucial source of tax revenue for the Kremlin, six months after the start of the war . Revenues from oil, petroleum products, gas and coal reached 158 billion euros between February 24 and August 24, calculated the Center for Research on Energy and Clean Air (Crea), a think tank, in a study published on Tuesday.

Taxes on hydrocarbons represent “more than 40% of Russia’s annual budget”, recalls the Crea. They would have brought in 43 billion euros over six months. The war costing the Kremlin some 500 million euros per day, the total bill for the conflict over the last six months would be around 100 billion, according to estimates taken up by the study. These exports are therefore an indispensable source of financing Russian military operations in Ukraine.

Coal mines closed

Russia’s export earnings have changed little from month to month since the invasion. They certainly fell in June, but they were once again trending up in July and August. Crude oil remains, by far, the first currency inflow, followed by petroleum products such as diesel fuel, then gas.

The European Union is the leading importer: the EU-27 bought 54% of Russian fossil fuel exports over the period. But this share continues to decline. For coal first, the Europeans are applying a total embargo since August 10 . And Russia is unable to sell its production to other countries “although the embargo has been announced for months”, notes the Crea. “In the weeks following the ban [d’importer] coal, there has been no noticeable increase in deliveries to other countries”. This collapse in exports is causing coal mine closures in Russia, according to the study.

Gas: prices multiplied by thirteen

Gas exports by pipeline are also falling. This is the result of the decisions of Moscow, which continues to reduce the supply of Europeans to punish the Old Continent for its support for Ukraine and, as Vladimir Putin hopes, to sow division among the Member States.

The precious molecule nevertheless still brings a lot to the coffers of the Kremlin, because gas blackmail has caused prices to explode: they were, in August 2022, thirteen times higher than they were a year earlier. Result, “Gazprom makes as much money selling its gas to the European Union today as in the first half of 2021”, despite volumes divided by four.

Putin’s game reaches its limits

This is changing, however, since the latest decisions from Moscow, taken last week and too recent to be taken into account by the Crea study. The total cessation of gas deliveries via Nord Stream 1 translates well into a decline in Gazprom’s income, because the rise in prices observed since Monday is not sufficient to compensate for the drop in volumes.

According to the calculations of Thierry Bros, professor at Sciences Po, Gazprom’s revenues will fall by a third with this shutdown, dropping from around a hundred million dollars a day to around 70 million. “Gazprom’s contracts with Germany and Italy, its biggest customers, certainly have ceiling prices that prevent them from reaching the peaks observed on the wholesale market , he explains. For the first time since the start of the war, Vladimir Putin’s game is undoubtedly reaching its limits: prices no longer fully compensate for volumes. »

Oil: India and China take over

For oil, the picture is very different. The European embargo will not come into force before December . This did not prevent exports to Europe from falling sharply, with many market participants having already stopped buying black gold and petroleum products from Russia. But this decline has been compensated.

India and China significantly increased their purchases over the period, as did Egypt and even Turkey , underlines the Crea. These countries, which have not sanctioned Moscow, take advantage of the discount that Russia is forced to apply to sell its production. This discount should be put into perspective, however, because world oil prices have risen sharply since the start of the war, brent still hovering around $100 the barrel.

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