In 2022, Russia’s energy sector experienced a year of unprecedented financial gains, largely due to elevated global energy prices. These revenues played a critical role in funding Russia’s war efforts. Data from the Federal Customs Service of the Russian Federation reveals that Russia’s oil and gas revenues reached a historic high of $384 billion in 2022. This record-breaking figure was propelled by an increase in the average price of Russian Urals oil to $76 per barrel, up from $69 in 2021, and a surge in gas prices to $1,500 per 1,000 cubic meters. These price increases enabled Gazprom to bolster its financial performance despite a decrease in exports to European nations. These exceptional export revenues effectively mitigated the impact of international sanctions and significant capital outflows, preventing a severe downturn in the Russian economy.
Prior to the imposition of oil embargoes, the European Union stood as the primary consumer of Russian energy resources. In 2022, the EU’s financial contributions to Russia’s energy sector totaled nearly 140 billion euros. To put this significant sum into perspective in terms of dollars, at an approximate exchange rate of 1 EUR to 1.05 USD during that period, this equates to roughly 147 billion dollars. This substantial financial inflow was broken down into approximately 83 billion euros for oil, 53 billion euros for gas, and an additional 3 billion euros for coal. When compared to previous years, the EU’s energy payments to Russia were 123 billion euros in 2021, 68 billion euros in 2020 during the pandemic-affected year, and 112 billion euros in 2019.
Estimates from Bruegel, a Belgian think tank, suggest that even with existing oil embargoes and limitations on gas supplies, Russia could still generate between 14 and 69 billion euros from the European energy market in 2023. Their baseline scenario projects a minimum revenue of 29 billion euros. This projection is based on the assumption that Russia will continue gas exports via Ukraine and the Turkish Stream pipeline at current volumes (630,000 megawatt-hours per day), and maintain liquefied natural gas supplies at the 2022 average of 510,000 megawatt-hours per day, priced at 50 euros per megawatt-hour. Crude oil imports are anticipated at 285,000 barrels per day via pipelines and 100,000 barrels per day via sea, with an average price of 55 euros per barrel.
Reaching the upper revenue estimate of 69 billion euros, comparable to the aid allocated to Ukraine by allies in 2022 (as estimated by the Institute for World Economics at the University of Kiel), hinges on specific conditions. Gas transit through Ukraine must match or exceed 2022 averages, potentially driven by increased European gas demand due to severe weather. LNG supplies would need to remain at peak 2022 levels (630,000 megawatt-hours per day), and oil supplies would need to exceed the baseline, possibly through increased demand from countries like Bulgaria and Poland. While Bruegel considers this scenario less probable, Bulgaria has already permitted the export of petroleum products derived from Russian oil to Ukraine. This extreme scenario also assumes doubled gas prices (100 euros per megawatt-hour) and Russian oil reaching $70 per barrel, a price point factored into Russia’s budget planning.
Bruegel’s analysis indicates that EU energy sanctions will remain partially effective without gas sale restrictions. If the extreme scenario of increased gas transit and higher prices materializes, Russia’s 2023 gas export revenues could mirror 2022 levels. While reduced European oil supplies could be redirected to Asian markets, minimizing Russian budget losses, gas export redirection is not feasible if sanctions are imposed. However, Europe’s energy balance is already fragile, and further supply reductions could negatively impact the region, mirroring the effects on Russia.
The effectiveness of current sanctions against Russian energy exports appears limited, making the Russian economy and budget increasingly reliant on oil prices. After peaking in early 2022, oil prices stabilized and then declined in early 2023, causing a significant drop in Russian budget revenues as Urals oil fell below $50 per barrel. However, OPEC+’s surprise production cut of 1.6 million barrels per day has recently driven prices up again. This price increase provides substantial support to Vladimir Putin’s war in Ukraine and his sanctions evasion strategies. This OPEC+ decision is anticipated to counterbalance the impact of any further EU sanctions on Russian energy exports.
