The Kremlin is set to receive a tax windfall from its brutal invasion of Ukraine sending energy prices soaring, reveals analysis released today.
Revenue from oil and gas sales “will increase significantly to more than $180bn (£143bn)” this year, energy consultancy Rystad Energy estimates, a 45 per cent and 181 per cent surcharge compared to Moscow’s tax take in 2021 and 2020 respectively.
The calculations underline how difficult it has been for western nations to choke off the Kremlin’s money supply to fund President Putin’s war machine.
European countries are beholden to Russian gas supplies, meaning plans to launch a full-scale energy embargo have been met with staunch opposition due to fears it would cripple the bloc’s economy.
Germany, Europe’s biggest economy, relies heavily on its industrial sector to generate output, meaning it would suffer a sharp blow to its GDP if Russian gas supplies were cut off.
Despite those reservations, Berlin has dropped its opposition to an EU-wide embargo on Russian oil, but still will not commit to stop importing gas from Moscow.
Economy minister Robert Habeck said yesterday the country would be able to weather a ramping up in Western sanctions that leveraged an oil ban to squeeze Putin’s resources for the war effort.
Last month, the country cut its share of Russian oil to 25 per cent of total imports from 35 per cent before its invasion of Ukraine, and Habeck now expects the country to be fully independent of Russian imports by the end of the summer.
The bloc is mulling plans to phase out Kremlin-backed supplies by the end of the year as part of an upcoming sixth package of sanctions.
However, Germany has caved into Russian demands to pay for gas in roubles.
German companies will purchase Russian gas through Gazprombank accounts, which will convert rouble payments into euros prior to the payment.
Moscow will be unable to replace western demand for energy supplies by rerouting oil and gas inventories to Asia, analysts said.
“Russia’s ability to redirect all unwanted cargoes from the West to Asia are limited, meaning that, in the case of embargoes, Russia will be forced to cut production further as it lacks storage capacity for extra crude volumes,” Rystad Energy said.