Fossil fuels are filling the Kremlin’s war chest, and despite sanctions, rhetoric, and support packages for Ukraine – the European Union (EU) remains its biggest buyer.
The trading bloc purchased 61 per cent of Russian energy supplies sold in the first 100 days after Russia’s invasion of Ukraine, revealed the Centre for Research on Energy and Clean Air (CREA).
It revealed Russia earned an eye-watering €93bn (£79.8bn) from fossil fuel exports worldwide between February 24 and June 3, with the EU spending approximately €57bn (£48.9bn) on oil, coal and gas during a time period characterised by war and bloody conflict in Ukraine.
This is more than ten times the amount it has provided Ukraine in financial aid.
Europe also dominated the rankings of the largest importing nations alongside Russia’s chief ally China, which topped the list with €12.6bn worth of supplies.
Germany (€12.1bn), Italy (€7.8bn), Netherlands (€7.8bn), Turkey (€6.7bn) and Poland (€4.4bn) rounded off the top five, with France (€4.3bn) and India (€3.4bn) also featuring high up the table.
Overall, Russian revenues from fossil fuel sales consisted of an estimated €46bn for crude oil, €24bn for pipeline gas,€ 13bn for oil products, €5.1bn for liquefied natural gas (LNG) and €4.8bn for coal.
The EU has finalised a phasing-out on Russian seaborne oil imports alongside its coal embargo, with the UK and US also bringing in restrictions on Russian fossil fuels.
However, it has failed to bring in any restrictions on Russian gas supplies, with the bloc dependent on Russia for around 40 per cent of its imports.
Only Lithuania has unilaterally unveiled gas restrictions among member states.
By contrast, the UK is reliant on Russia for only four per cent of its gas imports – although it is also yet to ban its supplies.
Reflecting the dependence on Russian gas, multiple European firms have caved into Kremlin demands for payments to be converted into roubles, while Germany and Austria have both enacted early-phase emergency plans that could eventually lead to it taking control of distributing domestic gas supplies if supply shortages worsen.
Countries that did not comply with rouble demands such as Poland, Bulgaria, and Finland, have seen Russian supplies cut off by Gazprom.
The continent is keen to ensure there are no supply shortages this winter, staving off blackouts last year courtesy of US LNG tankers – with the EU demanding member states top up storage to 80 per cent of capacity.
Supplies are currently sitting at around 51.5 per cent of capacity across the EU, according to iGas.
Western sanctions compromised by loopholes
The report also raised a number of red flags regarding recent sanctions, questioning their effectiveness due to market conditions and loopholes.
It revealed, import volumes fell 15 per cent last month worldwide, with countries shunning Russian supplies, costing the country around €200m a day from discounted fees and drops in demand.
However, supply shortages ensured export prices remain up 60 per cent year-on-year compared to pandemic era trading in 2021, creating something of a windfall for Russian sellers.
This has been driven by allies such as India, China, Saudi Arabia and the UAE dipping to discounted Russian supplies while France has also increased imports.
India has become a significant importer of Russian crude oil, buying 18 per cent of the country’s exports – well above pre-conflict levels of around three per cent.
Meanwhile, a significant share of the crude is re-exported as refined oil products, including to the US and Europe – an important loophole which remains open to Western buyers.
European buyers in France, Belgium and the Netherlands have bought most of the short-term cargoes at a discount, purchasing LNG and crude oil on the spot market.
These purchases take place outside of pre-existing contracts, hence always representing an active purchase decision and avoiding sanctions.
As for potential headwinds facing Russia, it noted most of its fossil fuels are transported on European ships, with more tanker capacity than ever before required to meet global energy needs.
In April-May this year, 68 per cent of deliveries of Russian crude oil were made with ships owned by EU, UK and Norwegian companies, with Greek tankers alone carrying 43 per cent.
For deliveries to India and the Middle East, the share was even higher at 80 per cent – with 97 per cent of the tankers insured in just three countries, UK, Norway and Sweden.
It suggested this was a key vulnerability, and that strong sanctions against tankers transporting Russian crude would significantly limit the scope for this kind of rerouting of Russia’s exports.