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Sanctions don't work: flow of petrodollars to the Kremlin is growing

Nov 17, 2023

Western sanctions on Russian oil exports cannot deprive the Kremlin of revenue to finance the war in Ukraine, which means that these measures fail to achieve one of their main goals.

This is reported by Bloomberg.

Data from the Russian Ministry of Finance, whether in dollars or rubles, net or gross, show that the flow of money to the state treasury has been increasing for several months.


As the agency notes, these figures raise the question of whether the G7 countries, especially the United States and Europe, will have to take more aggressive action if they really want to deprive Moscow of petrodollars.

A key tool to curb this funding has been a price cap that has prevented Western firms from helping to transport Russian oil if it costs more than $60 a barrel. But a study this week found that almost every sea cargo exceeded that threshold last month.

Russia's gross revenues from its three main tax sources of petrodollars nearly doubled between April and October, hitting more than $13 billion last month, Bloomberg calculations based on Treasury Department data show. October's gains exceeded those for any single month in 2021 before the invasion of Ukraine caused unprecedented volatility in exports.

Even after deducting the significant subsidies to the country's oil refining industry, which jumped to $2-3 billion in August and September, the sharp increase is obvious. In October, Russian oil refiners did not receive subsidies for the supply of fuel to the domestic market, which contributed to a significant jump in Russia's net oil revenues for the month.

A representative of the US Treasury Department said that while the first phase of the price cap focused on reducing the amount of revenue Russia receives from oil sales, the second phase of the measure will focus on increasing the costs Russia must pay to maintain supplies.

To do this, the ministry began sanctioning shipping companies and vessels that transported oil sold above the cap and began looking for ways to increase Russia's costs of using its shadow fleet.

Author – Anastasiya Glotova, 17/11/2023

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