Not natural gas, but the export of oil and petroleum products gives Russia more than 70% of all energy earnings which is used to finance the war in Ukraine.
The war will continue until the embargo is imposed on Russian oil. As you know, Hungary is blocking the oil embargo, which should become a key element of the sixth package of sanctions. And even if the veto is lifted, the sanctions package stipulates that crude oil supplies from Russia should be suspended within six months and oil products by the end of 2023. Here is the period during which Russian oil will be sent to European refineries. That is, the war will not last three months or six. It will be a long story.
The Russian economy depends on energy exports. Not natural gas but oil and petroleum products exports give Russia more than 70% of all energy earnings. To be precise, natural gas export brings 22% of all energy earnings, coal – about 7%, and oil and petroleum products – 71%.
Much of the oil is exported through the ports of the Black and Azov seas. While Ukraine has lost about 60% of its maritime exports and imports, Russia continues exporting oil products to the EU, Africa, and remote Asian countries – India and China. In April alone, Russia exported about 11 million tons of oil from the ports of the Black and Azov seas. 182 tankers with Russian oil and oil products passed through the Bosporus and Dardanelles during the month (about 50 tankers a week).
Why did the sanctions against vessels sailing under the flag of the Russian Federation not work and could not work? The sanctions included warnings: the ban does not apply to food and energy imports (oil, diesel, fuel oil, gasoline). Therefore, the task is to find ways for the EU to impose an embargo not only on crude oil but also on petroleum products, which make up about a third of crude oil.
In Russia, small tankers with a capacity of 4 to 7 thousand tons of oil make a small tanker fleet. The main part of transportation is performed by the Greek tanker fleet (it owns one of the largest tanker fleets in the world: one tanker can carry about 150 thousand tons of oil). The Greeks will significantly oppose the oil embargo on Russian oil because dozens of their tankers will have to be laid up, people will have to be fired, and they will lose their income. So, it is necessary either to compensate for the losses of Greece or find another way of using tankers transporting Russian oil. Otherwise, the Greek economy will face serious problems.
Russia’s goal to cut Ukraine off from the sea has been achieved
Not only Russian but also Kazakh oil is exported from Novorossiysk. Therefore, there is a problem with the imposition of sanctions: how to figure out whose oil it is? The following question arises – which kind of policy should be built for Kazakhstan? On one hand, the Kazakh authorities have not officially supported Russia’s aggression against Ukraine. On the other hand, the Kazakh pipeline – the Caspian Pipeline Consortium (CPC) – runs through Russia, which is 1,100 km out of 1,511 km of pipeline. It is managed by the Russian sanctioned company Transneft. It holds a 24% stake in the CPC and receives dividends, in addition, the Russian budget receives customs payments from the export of this oil.
Now about the situation around the seaports of Ukraine. To deprive Ukraine of its ports and gain access to the sea is Russia’s strategic goal. And today we can say that the goal of cutting off Ukraine from the sea has been achieved. Two ports are captured in the Sea of Azov, and the third one – is in Kherson. The work of the Mykolaiv port is blocked, and all ports in the Odesa region are idle. Therefore, only the river ports of the Dunay river – Reni and Izmail – remained in Ukraine.
Romania has already started shipping Ukrainian grain. Bulgaria has said it is ready to export Ukrainian grain. However, the problem is that the nearest railway to these countries is a bridge across the Dniester Estuary, which Russia is damaging with missiles. Another detour north of the Dniester Estuary passes through Moldova near Transnistria.
Ukrainian grain has been bought, in particular, by the Food and Agriculture Organization (FAO), which distributed grain to countries in need. Russia, like Ukraine, is one of the largest exporters of grain. That is why Russia is benefiting from the Ukrainian grain export suspension. This situation will inevitably lead to higher grain prices on world markets, and Russia, as one of the largest exporters of grain, will make money thanks to it. Or it will stop grain exports and blackmail the world.
Turkey has not supported the launch of the NATO Minesweepers into the Black Sea through the strait for demining. It would have been logical to deploy a permanent NATO mine group to the Black Sea from the Mediterranean to demine the sea and unblock Ukrainian grain exports. However, Turkey did not let them in, arguing that it could lead to the outbreak of war in the Black Sea.
That is the situation we have today.Russia russia ukraine war Ukraine