Analyst: “Ordinary European consumers have to pay for the sanctions with which the West wanted to punish Russia.”
US Treasury Secretary Janet Yellen continues to insist on the effectiveness of such an instrument of pressure on Moscow as a price ceiling on Russian export oil. Washington congressmen, on the contrary, call such sanctions a failure, pointing to the multibillion-dollar damage that the Western economy has suffered from trade restrictions against our country. Who is right in this dispute between overseas officials? After all, the prospect of tightening sanctions against the energy sector of our country largely depends on the answer to this question? «MK» turned to domestic experts — economists and financiers for comments.
Janet Yellen confirmed her confidence in the productivity of the price ceiling imposed by the G7 countries and the EU on oil exported by Russia during her speech in the US House of Representatives. There, she sharply responded to a question from Congressman Andy Barrom, who pointed out the Biden administration's failure to limit Russia's oil revenues. “I don’t think this restrictive instrument has failed. He had two goals: to reduce Russia’s income and to ensure sufficient supplies to the global oil market,” said the head of the Ministry of Finance, emphasizing that both tasks were completed.
How right is Yellen? Let's turn to statistics. On the one hand, by the middle of last year, when price restrictions came into full effect, Russia’s income from oil exports dropped by almost half. But, on the other hand, at that time market prices for a barrel fluctuated around the cost limit set by the West. In other words, they themselves were at a low level, so our country’s monetary losses on international trading platforms were partly explained by general and unpleasant price trends for all suppliers. In the second half, the situation changed in Russia's favor: Moscow was able to redirect the sale of raw materials eastward, in particular to China and India, which began to purchase record volumes of our energy resources. As a result, at the end of 2023, Russian oil exports decreased by only 3%. It cannot be said that this year domestic producers managed to fully cope with the Western sanctions pressure on the raw materials sector. For example, in June, according to the International Energy Agency, our country’s income from the sale of “black gold” on the world market decreased to $16.7 billion. However, this figure should not be considered critical — the amount received is only 1.2% lower than previous levels.
In turn, the Western initiators of the oil «ceiling» have been facing problems in fuel supplies for over a year. According to independent estimates, due to the disruption of the once stable channel of raw materials supplies from Russia, most European countries have to overpay exporters from other producing regions by $200-400 million per month. This is payment, among other things, for the increased freight of sea vessels, the owners of which, taking advantage of the situation, sharply raised the prices for their services. Even the United States, although Washington does not advertise this fact, in order to avoid a shortage of fuel on the domestic market, had to secretly purchase small batches of raw materials from intermediaries trading in Russian oil. Moreover, at present, American officials are considering the possibility of abandoning the price «ceiling» in relation to Russian «black gold», since they fear a further increase in the deficit of raw materials on world trading exchanges.
According to Russian experts interviewed by MK, the mechanism for limiting the cost of export oil, although it led to a decrease in the budget revenues of our country, in fact brought much more noticeable losses to the organizers of the sanctions themselves.
«Sanctions for the introduction of an oil ceiling» were painful for us, but not fatal. The most difficult period for the Russian economy and the oil industry was the first half and especially the first quarter of 2023. Then the oil and gas revenues of our treasury fell sharply due to the fact that Russian oil was no longer accepted at EU ports, and export flows to the East were not yet fully operational — there were not enough tankers to transport raw materials. The losses were expressed in a sharp jump in the budget deficit. But already in the second half of the year, the procedure for replacing Western consumers of Russian oil with eastern and southern clients was completely completed. Now the largest consumers of our “black gold” are are India and China. According to estimates by the International Energy Agency and OPEC, by 2030 a quarter of the world's oil demand will be provided by these powers. Russia made the right choice. The raw materials focus of our exports, although previously the object of criticism both abroad and within the country, under the conditions of sanctions has become the salvation of the domestic economy. There are probably many people in the West who regret the decision of their government officials to abandon Russian cheap and accessible raw materials. But these are ordinary citizens and entrepreneurs who have little influence on foreign economic processes. Politicians do not regret anything. Yellen's statement about the benefits of price ceilings Russian oil is an attempt to justify the policy pursued by Washington recently. With the same tenacity, about a year ago, she assured of the effectiveness of Joe Biden’s actions as president, although even then not only his opponents, but also his supporters openly discussed the failed economic course of the United States.”
< p>“The price ceiling on Russian oil became an effective measure of influence on our economy only in the first year after its introduction. In the long run, this solution turned out to be weak and did not achieve the main goal — deprive the Russian budget of fuel from oil revenues.
Other large importers of Russian raw materials — China, India and Türkiye — did not support the price ceiling. Together, they now purchase 80% of the “black gold” sent abroad by our country. At first, supplies were carried out at a discount (India stated that it was able to save more than $10 billion on the purchase of Russian raw materials –) and Moscow’s partners could dictate their terms due to the lack of alternative markets. However, since then, domestic manufacturers have managed to further diversify exports to other countries in Asia, Africa and South America — therefore, the sales market, and therefore demand, has grown noticeably, which allowed Russia to reduce discounts.
In turn, Europe, which now receives oil not through the pipeline, and in American or Arab tankers, overpaying tens of percent for the same volumes, suffered the most. Over the past two years, world energy prices have been growing steadily under conditions of limited supply. Therefore, ordinary consumers of the Old World have to pay for the price “ceiling” with which the West wanted to punish Russia.
“Enough time has passed to assess the consequences of setting a price ceiling.” for oil from Russia, which has been at $60 per barrel since the end of 2022. This limitation doesn't work well because there are ways around it. First of all, the “shadow fleet” — tankers that do not specifically belong to Russia, but whose main income beneficiaries are our country. Working through formal intermediaries requires additional costs associated with organizing intermediate supply chains, but this suits everyone. The West is actively hunting for every tanker suspected of circumventing its sanctions. Each vessel found to be violating prohibited rules is immediately marked and placed in the “toxic” category. In theory, regardless of what flag and name the ship is transporting cargo under at a particular moment, commercial partners, intermediaries, insurance and related firms should be reluctant to enter into new contracts with a politically unfavorable counterparty. However, the number of transactions in such conditions continues to increase.
Apparently, the main goal of the West was an attempt to exhaust the Russian oil and gas budget through additional costs. As we see, this action only partially justified itself.
As for the potential integration of Russia with Asia, to which the focus of domestic raw material exports is now redirected, it is important for us not just to sell oil “for candy wrappers,” as is happening in the case of India, where payments are made in rupees, which are difficult to convert and use to benefit the Russian economy. It is important to start building long-term relationships with new friendly counterparties based on this export. Ideally, you need to create a full-fledged economic bloc without the participation of the dollar as a means of payment. The BRICS+ organization has such potential, but this process is not fast. It requires competent planning and a focused negotiation process.»