By Paul Goble
According to the Russian Central Bank, Russia’s earnings from the sale of oil and gas abroad fell 47.8 percent after the start of Putin’s war in Ukraine compared to the last quarter of 2021 even though oil prices have risen dramatically. This reflects boycotts by the West and Russia’s inability to boost sales even with discounts to India and China.
In the most detailed Russian report on such earnings so far, the Central Bank also acknowledged that earnings of the extraction sector of the economy had fallen 39.8 percent overall (cbr.ru/Collection/Collection/File/40913/finflows_20220407.pdf and russian.eurasianet.org/россия-приток-нефтедолларов-сократился-вдвое-–-отчет-цб-рф).
Confronted with a complete boycott by the United States and a partial boycott by the European Union, Moscow has tried to make up for its loss in sales in two ways, offering discounts and pressing India and China to buy more. Neither of these strategies has proven effective.
Evidence of this is two-fold. On the one hand, Russian discount offers have risen from 10 US dollars a barrel to as much as a reported 35 US dollars per barrel without stemming the decline in earnings. And on the other, despite a visit to Delhi and Beijing by Russian foreign minister Sergey Lavrov, neither country has significantly increased its purchases.
India has purchased a total of only three million tons more over the entire period, a drop in the bucket since it has been buying that amount on a daily basis up to now. And Chinese increases have been small as well because many Chinese firms do not want to take the risk of falling under Western sanctions.
Russia’s situation in this regard almost certainly is going to get worse: the EU is currently discussing imposing a boycott as well, something that would mean Russia’s export earnings – and ultimately its ability to pay for Putin’s aggressive wars – will be compromised if not immediately than at least in the medium term.