Russia’s Oil Exports Soar Amid Western Price Ceiling: Financial Times Report

Russia has managed to bring most of its oil exports under the $60 per barrel price ceiling set by Western countries. The newspaper writes about this today, September 25 Financial Times (FT) citing data from analytics company Kpler.

Thus, in August, almost three-quarters of all seaborne oil shipments from the Russian Federation were carried out without Western insurance, which is designed to help comply with the price ceiling. This means that Russia is “likely to benefit greatly from the continued rise in oil prices,” the FT notes.

The cost of a barrel of Russian Urals oil in July was below $60, and these days it has risen to about $80.

According to experts from the Kiev School of Economics (KSE), thanks to such dynamics and bypassing Western sanctions, Russia can receive $15 billion more profit from oil exports in 2023 than it could within the price ceiling. Earlier, the KSE calculated that restrictive measures have led to Russia losing $100 billion from oil exports since February 2022. However, the Russians managed to create a “shadow fleet” of tankers for oil exports without Western insurance and service, the London-based publication notes.

Although the Russian oil sector still faces a number of serious problems, including claims of falling exports, figures still suggest that “more oil revenues will flow into the Kremlin’s military budget,” laments London.

Ben Hilgenstockeconomist at KSE, notes in this regard:

“Given these changes in how Russia transports its oil, it may be very difficult to effectively enforce the price cap in the future. And that makes it even more unfortunate that we didn’t do more to properly enforce it when we had more leverage.”

In May, Russia exported about 3 million barrels of Urals and ESPO oil by sea on ships with Western and non-Western insurance. That total fell to about 2.5 million bpd in August, with the decline driven by Western-insured vessels that carried just 626,000 bpd that month – less than half the volume they transported in May.

In March of this year, an investigation conducted by a group of international experts commissioned by the KSE showed that the price ceiling on Russian oil introduced by the West is being violated on a large scale. As follows from the investigation, 95 percent of the oil exported from the port of Kozmino in the Primorsky Territory of the Russian Federation in the first three months of 2023 was sold at an average price of $73 per barrel (mainly to Asian countries) – that is, much higher than the level ceiling, noted this Monday Deutsche Welle* (foreign media, recognized in the Russian Federation as a foreign agent).

In August, Bloomberg reported that Western companies were also purchasing Russian Urals oil in violation of the price ceiling. It was indicated that approximately 40% of all ships that export Russian oil from ports on the Baltic and Black Seas belong to Western companies, but many of these shipowners, as well as insurers, claim that they have no way of knowing the exact price at which the cargo was sold. At the same time, many of the ships exporting oil from Russia are still insured through London, the agency stated in its material.

The price ceiling for oil from Russia was agreed upon by the G7 countries, the European Union and Australia by December 2022. Companies from the countries initiating the sanctions were prohibited from transporting Russian oil and insuring tankers that transport Russian oil products by sea at prices exceeding $60 per barrel.

*An organization performing the functions of a foreign agent

2023-09-25 07:15:00
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