Russia’s February Oil and Gas Revenues Soar Despite Sanctions Ahead of Elections
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Russia’s energy revenues in February reached a whopping 80% increase from the previous year despite facing sanctions due to its invasion in Ukraine. The country has been able to bypass these sanctions by utilizing a price-floor mechanism. Find out how Russia is still able to make big profits from oil despite the ongoing conflict.
In preparation for the upcoming presidential elections later this month, Russia has played a card that nearly doubled its energy revenues. According to data from the country’s Finance Ministry, the energy giant raked in a total of 945.6 billion rubles ($10.4 billion) in February alone. This is a huge jump from 521.2 billion rubles in February 2023, as reported by Bloomberg.
The increase in revenues is mainly attributed to the levies placed on crude and petroleum products, which have more than doubled in the last year. This is particularly striking considering the extensive Western sanctions still imposed on Russia due to its war in Ukraine, which has now been ongoing for three years. But how is Russia still able to make so much money off of oil?
The extra revenue generated in February was a result of higher taxes placed on domestic oil producers. This mechanism was already in place, but it was only recently activated. According to Bloomberg, Moscow applied a price floor for its January oil sales and began receiving these taxes in February. This move came after the price of Russia’s flagship Urals crude dropped due to stricter sanctions enforced by the West.
Russia heavily relies on its oil and gas industry, with one-third of its revenue coming from these sources. The European Union, previously the country’s main customer, has been trying to lessen its dependence on Russian oil and gas in order to weaken the Kremlin’s war chest. A cap of $60 a barrel on Russian oil, imposed by the G7 countries, has also contributed to keeping a lid on prices and the Kremlin’s oil revenues.
However, these restrictions do not prohibit other countries from buying Russian oil as long as they do not use Western insurance and shipping services. Russia has taken advantage of this by shifting its customer base towards countries like India and China. The country has also found ways to bypass the price cap and sanctions by using intermediaries and a large “dark” fleet of aging ships to “launder” its oil.
As the West tightens trade restrictions against Russia, the pressure to end the war in Ukraine continues to grow. The US and EU have even resorted to imposing secondary sanctions on companies outside their legal jurisdictions. These moves have kept Russia on edge, with the Kremlin’s spokesperson, Dmitry Peskov, admitting to issues with Chinese bank transactions in February.
With the presidential election coming up later this month, Putin’s government is faced with the need to maintain stability. The conflict in Ukraine has been going on for years and the Russian people may have already grown weary of it. Yet, Russia’s oil revenues don’t only fund the war, but also social spending that Putin has promised to the people as he heads to the polls.
Set to take place from March 15 to March 17, Russia’s presidential election is highly anticipated, with Putin expected to win against three opponents. With its oil industry still running strong despite sanctions, it seems that Putin may be able to deliver on his promises and maintain his hold on power for yet another term.
