In the 100 days since the beginning of the Ukraine war on February 24, which saw horrific mass destruction and death across the nation, countries in the European Union were some of the top importers of Russian fossil fuels, a new Independent Centre for Research on Energy and Clean Air (CREA) report finds.
According to CREA, Russia has earned $98bn from fossil fuel exports, mostly to European countries, during these 100 days.
The news comes on day 110 of the war, when Russian forces continue to make slow but steady progress in capturing the Donbas region in eastern Ukraine — and when the last remaining bridge to Severodonersk, a strategically important city in the Luhansk region, has been destroyed, making it impossible for civilians to be evacuated or for Ukrainian soldiers to retreat.
In sum, the CREA report found that:
- The EU accounted for 61% of Russia’s fossil fuel exports during the war’s first 100 days, worth $60bn, and have essentially filled the “Kremlin’s war chest”
- China was the top importer of gas (overtaking Germany), at $13.2bn, followed by:
- Germany – $12.7bn (a modest reduction in Russian imports for Germany
- Italy – $8.2bn
- Netherlands – $8.4bn
- Turkey $7bn
- Poland $4.6bn
- France $4.5bn
- India $3.6bn
- Russia’s fossil fuel revenues during these 100 days came mostly from the sale of crude oil (EUR46bn), as well as Pipeline gas (EU24bn), Oil products (EUR13bn), Liquefied natural gas (LNG) (EUR5.1bn), and Coal (EUR4.8bn).
BREAKING: Russia earned EUR 93 billion in revenue from fossil fuel exports in the first 100 days of the invasion of Ukraine. The EU imported 61% of this, worth approximately 57 billion EUR.
— Centre for Research on Energy and Clean Air (@CREACleanAir) June 13, 2022
The report also finds that import volumes fell around 15% in May compared to before the invasion, as countries and firms shunned Russian supplies. This cost Russia around 200 million EUR per day in May but increases in fossil fuel demand ensured these losses were compensated for.
As the report highlights, Russia’s average export prices are now 60% higher than they were one year ago.
Poland and the United States caused the largest reductions in Russia’s revenue, with Lithuania, Finland and Estonia also achieving significant reductions of over 50%.
Although record-high fossil fuel prices and the drive to reduce reliance on Russia prompted increased ambition for clean energy across most European countries, France, Belgium, the Netherlands, Saudi Arabia and the UAE dipped into discounted Russian fuels.
India also became a significant importer of Russian crude oil, some of which gets refined in India and re-exported to the U.S. and Europe, creating a loophole.
Most Russian fossil fuels are transported on European ships, the report finds, suggesting that sanctions on ships transporting Russian crude could limit the scope of its exports. Between April and May, 68% of Russian fossil fuels exports heading towards Europe were transported with ships owned by EU, UK, and Norwegian companies
Furthermore, 15 oil, power and industrial firms continued purchases in May, including Exxon, Shell, and Total, as well as power utility companies like Taipower and TEPCO, and industrial companies such as Nippon Steel and POSCO. At the same time, other companies have stopped taking further shipments in May, including Hyundai Steel, Mitsubishi, and Enagasm.
Russian fuel export revenues at record highs
The US and EU have responded to the war by sending weapons and funds to help Ukraine combat the Russian invasion, as well as by punishing Moscow with tough economic sanctions in hopes of inflicting enough damage on the Russian economy to de-escalate the conflict.
These included sanctions on Russia’s central bank, disconnecting Russia’s largest banks from customer payments; banning access of Russian banks and companies to Western capital markets; and sanctions on technology and aviation industries, among other things.
As part of its sixth pack of sanctions delivered earlier this month, the EU agreed to halt most Russian oil imports and reduce gas shipments by 2/3 this year. However, a full Russian fuel embargo was not agreed to. With the price of Russian gas increasing from €20 per megawatt-hour to €120 and the soaring energy prices straining livelihoods worldwide, many countries fear a ban on Russian gas would prevent them from filling up gas stores before winter.
Nevertheless, several EU leaders are calling for a seventh sanctions package targeting Russian natural gas, which for now has only been banned by a handful of individual countries, including the US. Others instead insist that the EU halts energy-related sanctions as they believe the oil ban was agreed before a full understanding of its consequences was reached.
CREA’s news as a call to action
CREA analyst Lauri Myllyvirta states of the findings:
“As the EU is considering stricter sanctions against Russia, France has increased its imports to become the largest buyer of LNG in the world […] Since most of these are spot purchases rather than long-term contracts, France is consciously deciding to use Russian energy in the wake of the invasion.”
Myllyvirta called for an embargo on Russian fossil fuels to “align actions with words.”
At the Austrian world summit climate conference, Arnold Schwarznegger pointed to the striking disparity between Russia’s war costs and energy revenues.
“Let’s be true to ourselves. 1,300 missiles Russia has launched on Ukrainian cities during the first two months of war cost 7.7billion euros. But at the same time, the EU paid Russia €44 billion for fuel. We have blood on our hands, as we are financing the war,” Schwarznegger said.
Schwarznegger then pointed to renewable energy as the solution, saying “right now we have all the technology. We need to leave fossil fuels in the past”
VIDEO: At the Austrian World Summit climate conference, Arnold Schwarzenegger denounces Europe for "financing the war" in Ukraine by paying Russia for fuel, saying "we have blood on our hands" pic.twitter.com/i5tNH48eIT
— AFP News Agency (@AFP) June 15, 2022
Kyiv has echoed these calls in addresses to western leaders, asking them to sever all trade with Moscow to cut off its financial lifeline.
Innovative solutions focused on the green transition
Felix Creutzig, group leader at the Mercator Research Institute on Global Commons and Climate Change, and chair of sustainability economics of human settlements at Technical University of Berlin, has recently proposed ideas to combat the issue of Russia’s income soaring during the war due to EU reliance on Russia for its gas (40%), coal (50%) and oil (25%).
How can countries reduce their Russian energy imports and simultaneously address climate change? “The two agendas overlap,” he writes.
Essentially, to slash energy demand, three sectors are central: transport, buildings, and food production. EU countries must cut reliance on Russian fuel by curbing their emissions, and choosing renewable solutions that are efficient, implemented with care, and backed by policy.
Governments that instead increase or subsidise domestic gas and oil supplies, burn coal, or ship LNG may slow fuel-price increases in the near term. But in the long run, they will face even greater economic damage from climate change.
Overall, Russia’s invasion of Ukraine makes it clear that continuing with the old-world economy will only result in more resource shortages, empowerment of authoritarian regimes, wars, and climate devastation. The benefits of adopting new, clean technologies on the other hand will build year on year.
“Such solutions aren’t new, but the war in Ukraine has made implementing them more urgent and palatable, politically and socially. It will require more than personal choice — regulation and market interventions will be needed to make low-carbon the obvious option,” Creutzig remarks.
Statistics affirm that sanctions are rarely successful in ending conflict
Six rounds of sanctions have been imposed against Russia, but have they had the desired effects? At the time of writing, this seems unlikely.
Russia has still found ways to boost its economy, and Bloomberg economists’ predictions that Russia will earn about $320 billion from energy exports this year, over a third more than in 2021, seem to be coming true.
Even if European countries incrementally wean off Russian oil as they are being asked to, the industry may shift its focus onto the Asian market entirely, delaying the negative impacts of European fuel embargoes on Russia. Further innovative solutions with momentum, like Creutzig’s, are needed, and now.
Editor’s Note: The opinions expressed here by Impakter.com columnists are their own, not those of Impakter.com. — In the Featured Photo: Northern Sea Route. Featured Photo Credit: High North News.