Espreso. Global

How U.S. energy policies could cripple Russia’s oil exports

Sofiia Turko
25 January, 2025 Saturday
18:45

A military expert, Oleksandr Kovalenko, provides an in-depth analysis of the escalating tensions over energy policies. Donald Trump’s strategies to lower oil prices are putting immense pressure on Russia’s already struggling oil industry, further exposing vulnerabilities in Vladimir Putin’s regime

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Kovalenko thinks that oil has become a particularly sensitive issue for Putin, especially in light of recent remarks by Donald Trump regarding sanctions against Russia and the potential for oil price reductions. 

Trump’s statements on sanctions are closely tied to his broader agenda of reducing global oil prices, a strategy that aligns with his long-standing goal of asserting U.S. dominance in the global oil and gas markets. This means that regardless of how compliant Russia may be under Putin's regime, the U.S. will continue to push for price reductions, which will heavily impact Russia’s economy.

To illustrate the severity of the situation, one only needs to look at Trump’s first term, where his energy policies contributed to a historic drop in global oil prices. In April 2020, the price of Russian Urals crude fell to below $14 a barrel for the first time since the 1990s, a level that was critically below production costs. This resulted in Russia being forced to shut down many of its oil wells, leaving only those that were too old and worn out to be closed.

Moreover, the quality of Russian oil began to suffer, as reports indicated sulfur levels exceeding the maximum allowable limits, and density issues in shipments became more frequent. This pointed to a deterioration in the technological processes used in oil production and a significant decline in the overall quality of Russian oil.

According to a 2018-2019 report by Russia’s Ministry of Energy, oil production in the country is projected to decline from 11 million barrels per day to just 6 million barrels per day by 2030, effectively limiting Russia to self-sufficiency and diminishing its role as a major oil exporter.

This ongoing decline could be accelerating faster than anticipated. For instance, a report by the Russian Ministry of Natural Resources indicated that no new large-scale oil or gas fields had been developed in Russia between 2016 and 2017. Meanwhile, the depletion of existing fields in the Urals and Western Siberia has surpassed 70% and 50%, respectively.

Further adding to the crisis, a 2019 survey by Rosnedra found that 33% of Russia’s oil fields were already unprofitable. With current conditions worsening, the situation could be even graver today.

In addition to these challenges, Ukrainian drone strikes on Russian oil infrastructure have already caused an 18% reduction in Russia's oil export capacity. If these attacks continue with the same intensity, Russia’s oil refining sector could experience losses exceeding 30% over the next six months.

In this context, a significant drop in global oil prices, for instance, to $45 per barrel for benchmark Brent crude, would be disastrous for Russia’s oil industry. Such a price reduction would be comparable to a financial death knell for the sector, making it extremely difficult for Russia to recover from the economic impact.

  • Kremlin leader Vladimir Putin announced that Russia is ready for talks regarding the war in Ukraine. The Ukrainian President’s Office stated that the Russian leader is attempting to promote the idea of negotiations with the U.S.
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