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| Source: CREA |
Despite the sanctions, Russia still exports fossil fuel to a significant group of countries that include some countries in the EU. Since exporting fossil fuels has been a cornerstone of its economy, the war in Ukraine and the subsequent sanctions imposed by the West have made an impact on its coffers - for obvious reasons.
To make matters worse for Russia, the European Union imposed what it calls, phased-in ban on imports of Russia oil on December 5, 2023. With this move, Russian oil revenues were dealt a major blow, according to seasoned analysts.
The sanctions have resulted in the inability of collecting revenue for its oil exports by Russia. In order to get round the challenge, Russia started selling oil at heavily discounted prices for India and China.
The challenge, however, is far from over: according to estimates by the Center for Research on Energy and Clean Air (CREA), for instance, Russia's oil export revenues in October 2023 were down by 36% compared to October 2022.
The production cuts announced by Saudi Arabia and Russia in unison, must have played its corresponding role in losing the revenues for the latter. Saudi Arabia, meanwhile, has decided to cut the Arab light crude price for Asia by $3 in January, next year in order to keep the existing major customers in the region within the perimeter of loyalty.
When Russia experienced revenue crunch, both India and China took the advantage by importing fossil fuels at an exponential rate: in the first half of 2023, India's imports of oil rose by 250%! China's import quota cannot be small either.
The imports by India and China, however, have slowed down, according to the latest data. The Chinese imports, for instance, have fallen by 11% in November, compared to the very figure in October.
On Monday, meanwhile, Rameswar Teli, the Indian junior oil minster, announced that Indian refinery capacity will go up by 22% by 2028, indicating India's determination to import oil from where it can get it cheap.
Hardeep Singh Puri, the Indian oil minister, has already been on record saying that India will buy from wherever it is available cheap, referring to the entry of Venezuela to fold. Both Russia and Saudi Arabia appear to be taking into account the worst-case-scenario.
As the renewable sector shows a significant growth in Europe, despite being inconsistent, Russia's market share will go further downhill in the foreseeable future, if the status quo in the war in Ukraine remains the same.
In this context, the apparent efforts made by President Putin to mitigate the crisis by visiting the two stalwarts OPEC+ is understandable. Mr Putin must have discussed the possibility of reducing the output by the member countries for stabilizing the crude oil markets.
As of Monday, the price of crude oil, meanwhile, remained in the realm of volatility, much to the frustration of the oil producers, as the estimated production cuts have lost steam in influencing the prices.
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