Western sanctions imposed on Russia have significantly reduced the country’s oil revenues and diverted tens of billions of dollars to shipping and oil refining companies, some of which have ties to Moscow, a Reuters analysis shows.

Most of the beneficiaries of the sanctions imposed on Russia are companies in China, India, Greece and the United Arab Emirates, according to several sources in the trade and banking industry. Some of these companies are partially owned by Russian companies.

None of these companies are in violation of sanctions, the sources said, but they have benefited from measures designed by the European Union and the United States to reduce Russian President Vladimir Putin’s income to finance the war in Ukraine.

Putin warned the West that sanctions would lead to higher energy prices. Instead, the price of a barrel of Brent oil fell to $80 from $139 in March 2022, a few weeks after the start of the war in Ukraine.

For comparison, before the invasion of Ukraine, a barrel of Brent oil cost somewhere between 65 and 85 dollars.

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In recent weeks, the Russian budget has suffered

In parallel, after a group of highly industrialized countries set a ceiling price for Russian crude oil in December 2022, in January 2023, Moscow’s revenues from oil exports fell by 40% year-on-year, according to the Ministry of Finance of Russia.

“The lower official oil price means that the Russian state budget has suffered in recent weeks,” said Serhii Vakulenko, an analyst at the Carnegie Endowment for International Peace.

Vakulenko was previously the strategy director of Russian energy giant Gazprom Nafto, but left the company and left Russia after the war began.

“Judging by the customs data, some of the benefits were received by oil refining companies from India and China, but the main benefits should be companies engaged in oil transportation, intermediaries and Russian oil companies,” Vakulenko added.

Sanctions imposed on Russia include an embargo on the purchase of Russian energy by US and EU companies, as well as a ban on the delivery of Russian oil anywhere in the world unless it is sold at a price below $60 per barrel.

In response, Russia has diverted most of its oil and petroleum product exports to Asia, offering significant price discounts to buyers in China and India compared to oil coming from the Middle East. In addition, due to sanctions, Russia is forced to pay extra for the transportation of oil to customers, since it does not have enough oil tankers to transport all its exports.

Russia offers discounts on oil

At the end of January, Russian oil companies were offering discounts of $15-20 per barrel to buyers in India and China, according to traders consulted by Reuters.

In addition, traders found that Russian oil groups also paid shipping companies between $15 and $20 per barrel to transport crude oil from Russia to China or India.

As a result of these discounts offered to customers, Russian companies received a price of only $49.48 per barrel of Urals crude oil in January, which is 42% less year-on-year and equivalent to only 60% of the price of Brent oil. .

With production of 10.7 million barrels per day in 2022 and exports of crude oil and refined products at seven million barrels per day, discounts and additional costs will reduce the revenues of Russian oil companies by tens of billions of dollars in 2023.

However, some of the lost revenues are also received by Russian companies, but the exact amount of profits received by manufacturers and the Russian state is difficult to calculate.

Transport companies earn 10 times more

A number of experts, such as Serhiy Vakulenko, and Russian oil traders point out that Russia’s shortfall in profits coincides with higher profits for some intermediaries. In addition, after several decades of little profit or loss, certain sectors of the global shipping industry are experiencing a financial boom from Russian oil.

Among these companies are the Russian state-owned company Sovcomflot, which is run by Sergey Frank, an ally of Putin, as well as the Greek shipping companies TMS Tankers Management, Stealth Maritime, Kyklades Maritime, Dynacom, Delta Tankers, NGM Energy and New Shipping.

In addition, some oil tanker owners in Greece and Norway have sold their old vessels at record prices to shipping companies such as Dubai’s Fractal Shipping.

An invoice seen by Reuters shows that in January 2023, the shipping company asked a Russian oil seller for nearly $10.5 million to transport 700,000 barrels of crude oil from a port on the Baltic Sea to a refinery in India.

A year ago, a similar trip would have cost a Russian oil seller from 500,000 to a million dollars.

For a shipping company, the real cost of such a trip at today’s prices ranges from $500,000 to $1 million, meaning the shipping company’s net profit from one voyage can be $10 million.

China has saved billions in the last 10 months

A trader associated with the Russian oil business described the oil business as “unbelievably good”.

At the same time, oil refining companies in India and China also receive large discounts for processing Russian crude oil. In recent weeks, India’s imports of Russian oil have hit an all-time high of 1.25 million barrels a day, meaning India is saving $500 million a month by buying Russian oil at a discount of about $15 a barrel.

Emma Lee, an analyst at Vortexa Analytics, estimates that from April 2022 to January 2023, China imported 1.8 million barrels of Russian crude oil per day.

Based on a discount of $10 per barrel, Chinese oil refiners saved $5.5 billion in ten months. (Agerpress)

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