Russia exports oil under pressure, but there is evidence for sanctions violations – Research

Kyiv School of Economics conducts a study on Russia’s oil exports.

According to the Institute, Ukraine's allies kept Russian oil on the global market to prevent price increases. This led to a significant drop in Russia's oil exports (30% in 2023Q1 compared to 2022Q4) and a 47% decrease in budget revenues from hydrocarbons. The EU embargo resulted in wider discounts for Russian oil. 

However, there are indications of potential sanctions violations, including the circumvention of the G7 price cap regime. The recent study "Russian Oil Exports Under International Sanctions" by KSE Institute revealed that Russian crude oil prices were $73/barrel at the Kozmino port in 2023Q1, with Western shipping service providers still involved in the trade. 

It is noted that the market for Russian crude oil has shifted dramatically, with China and India becoming the primary buyers, while European countries now have a minimal role, accounting for only 19% of exports in 2023Q1. The EU embargo caused market fragmentation, with varying demand and price dynamics.

The study shows that 96% of oil exported from Kozmino in 2023Q1 exceeded the $60/barrel price cap. Ship tracking data indicates involvement of Western ships and maritime insurance companies, suggesting widespread circumvention of the price cap regime. This highlights the need for effective sanctions enforcement, according to the report. 

The study suggests the following actions to strengthen sanctions in Ukraine:

• Audit transactions to identify price cap violators.

• Increase transparency in transactions without Western shipping providers.

• Enhance administrative capacities for monitoring sanctions compliance.

If not addressed, this situation will boost Russia's export and budget revenues, the study report concludes.