Putin in crisis: Russia’s oil and gas revenues PLUMMET as sanctions finally pay off

Expert says the Kremlin is worried about economic sanctions

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Moscow’s additional oil and natural gas revenues fell below estimates, reaching 259 billion rubles (about £3.5 illion) in July, the Ministry of Finance of Russia reported Wednesday, adding that this is 74.7 billion rubles lower than projections.

The estimate for August is 359 billion rubles (about £4.9 billion).

The ministry announced that extra revenue from the country’s oil and natural gas exports will not be added to reserves this year but be used to support the economy instead.

The slump in revenue could be linked to measures taken by the European Union against Russian oil and gas.

As part of its sixth package of sanctions, it banned imports of all Russian seaborne crude oil and petroleum products, which cover 90 percent of the bloc’s current oil imports from Russia.

But despite Russia’s oil exports hitting their lowest levels since last August, its export revenue in June increased by $700 million month on month due to higher prices, 40 percent above last year’s average, according to the International Energy Agency.

Meanwhile, key oil consumers China and India have stepped up imports of discounted Russian barrels to record levels.

The Group of Seven (G7) wealthy nations — Britain, Canada, France, Germany, Italy, Japan, and the United States — is looking at blocking the transportation of Russian oil to deprive Moscow of bumper revenues.

It said in a statement released by Britain on Tuesday: “As we phase out Russian energy from our domestic markets, we will seek to develop solutions that reduce Russian revenues from hydrocarbons, support stability in global energy markets, and minimise negative economic impacts.”

G7 foreign ministers said they were considering “a comprehensive prohibition of all services that enable transportation of Russian seaborne crude oil and petroleum products globally, unless the oil is purchased at or below a price to be agreed in consultation with international partners”.

One of the moves proposed by Western leaders is an oil price cap to limit how much refiners and traders can pay for Russian crude.

Moscow, however, says it will not abide by it and can thwart by shipping oil to states not obeying the price ceiling.

They explained: “In considering this and other options, we will also consider mitigation mechanisms alongside our restrictive measures to ensure the most vulnerable and impacted countries maintain access to energy markets including from Russia.”

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Some traders and oil market analysts have voiced hesitation a price cap would work as Russia has found ways to ship its oil to Asia without the use of Western ship insurance.

The Kremlin could also rule an end to exports of some oil altogether, leading to a further spike in energy prices.

A further package of sanctions, issued by the EU in late July, targeted 48 individuals and nine entities, including Russia’s biggest lender, SberBank, and two international actors, Vladimir Mashkov and Sergey Bezrukov.

The package was praised by European Commission president Ursula von der Leyen, who said the “reinforced, prolonged EU sanctions against the Kremlin” send “a strong signal to Moscow: we will keep the pressure high for as long as it takes”.

In yet another effort against Putin, Alina Kabaeva, the dictator’s reported girlfriend, landed on the latest update to the federal Office of Foreign Assets Control’s specially designated nationals list.

This means any of the 39-year-old’s assets in the US are frozen and generally prohibits Americans from dealing with her.

The White House said in April that Kabaeva, a famed former rhythmic gymnast, nor anyone else was safe from sanctions, even after her last-minute removal from a round of such penalties that month.

UK officials sanctioned the Putin ally, who is now chairperson of Russia’s New Media Group, the country’s largest private media company, in May.

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