As Europe prepares to join the U.S. in hitting the Kremlin with tighter sanctions for its war on Ukraine, there are plenty of signs that Russia is finding ways to prop up its economy. Cargoes of Russian Sokol crude from the Far East have sold out for next month, and several Chinese firms used local currency to buy Russian coal in March. Gas flows from Russia to Europe have, if anything, increased since the invasion on Feb. 24. None of these are the subject of restrictions.
Bloomberg Economics expects Russia will earn about $320 billion from energy exports this year, up by more than a third from 2021. The ruble has already rebounded to its pre-war price against the dollar.
While Russia’s oil output is declining this month, its ability to keep the energy money flowing and boost its currency are frustrating western leaders. That resilience is also is handing President Vladimir Putin a win at home, even with the country increasingly isolated and the Russian military pulling back from swathes of Ukraine. “There is no doubt that the financial and other sanctions have weakened the Russian economy,” Patrick Honohan, a senior fellow at the Peterson Institute in Washington and former European Central Bank policy maker, wrote in a blog post on Wednesday. “But the sanctions fall short of crippling the economy, as long as they do not interrupt the flow of revenue from exports.” European Union ambassadors are meeting in Brussels on Thursday to agree on a fifth round of sanctions, with proposals to phase out Russian coal as the first step in addressing energy imports. The European Commission, the EU’s executive, is also aiming to ban most Russian trucks and ships from entering the bloc, with exceptions for agricultural products, humanitarian aid and energy. With Russia regrouping for a fresh offensive in eastern Ukraine, China is preparing to receive the first commodity shipments from Moscow paid for in yuan since several Russian banks were cut off from the international financial system. Russian crude that would normally end up in refineries in Europe or the U.S. is heading for Asia, where buyers, particularly in India, are taking advantage of steep discounts. Shipments from the Black Sea and Russia’s Baltic Sea ports of Primorsk and Ust-Luga started heading to India in March, following earlier cargoes from the same terminals to China. Russia’s natural gas supplies, which like oil have yet to be sanctioned by the EU, continue to flow freely as Europe faces an energy cost crunch that’s prompting governments to think twice before taking any action that might see prices rise further. Europe relies on Russia for about 40% of its gas needs, with a third of those supplies traveling through pipelines crossing Ukraine. As the war started, the jump in prices meant it was cheaper for European utilities to order more Russian supplies under long-term contracts than to buy it at the continent’s hubs. As a result, Europe’s request for Russian gas increased, helping state-run exporter Gazprom PJSC to boost its daily sales to key foreign markets by 17% in March from a month earlier. The export earnings are what “Russia’s military machine requires” to continue its war against Ukraine, according to Ukraine’s foreign Ministry, singling out Hungary for its willingness to accede to Russia and pay for energy in rubles. Russia’s oil output dropped by the most in almost two years in early April as some buyers looked elsewhere, based on data from the Energy Ministry’s CDU-TEK unit that were seen by Bloomberg. Revelations of more atrocities are likely to cause countries to harden their resolve and move to cut energy imports even at the risk to their own economies, according to Elina Ribakova and Benjamin Hilgenstock, economists at the Institute of International Finance. NN: Sanctions are the dumbest thing i ever heard of. Putin is evil not stupid. He knows he would be sanctioned. And he is dancing a jig became NATO is not bellying up to the bar. Reality is the Ukraine has been hung out to dry. Little UN ditties are not going to stop him. Remember Putin waited for ten years to get Europe addicted to his gas and oil. Their is not stopping him except mitairley and Europe has no stomach for armed conflict.