Sanctions, which were meant to hurt the Russian economy, have boosted Russia’s oil and gas revenue, and just four months later, the Russian federal budget has received 50 percent of its planned 2022 oil and gas revenue.
The sanctions imposed on Russia by European and American countries are like Catch-22. They originally hoped to sanction Russia by embargoing Russian oil, but in fact Russia is enjoying the high income brought by high oil prices. Contradictory and illogical.
As early as February, before the Russian-Ukrainian conflict broke out, American energy engineer Robert Rapier pointed out in an op-ed for Forbes that Russia is a major oil supplier to the United States and that Russia is likely to benefit from sanctions on its oil exports. Rapier warns that if a Russian-Ukrainian conflict does break out:
The U.S. will impose sanctions that could reduce oil supplies in an already tight crude market, while a surge in oil prices could do Russia well if it can still sell all the oil it can produce to countries that refuse to comply with sanctions economic benefits.
This has now been proven, with the latest data showing that sanctions, which were meant to hurt the Russian economy, have boosted Russia’s oil and gas revenues:
In April, Russia’s oil and gas revenue hit another record, hitting a record 1.8 trillion rubles in a single month, following March’s 1.2 trillion rubles. Just 4 months later, the Russian federal budget has already received 50% (9.5 trillion) of oil and gas revenues planned for 2022.
Rapier noted that while the U.S. has stopped buying Russian oil, the challenge remains that Russia is one of the world’s largest oil producers and exporters. Withdrawing some Russian oil from the market will only push up prices and increase its oil revenues. To completely remove Russian oil from the market, oil prices would have to be pushed up a lot—perhaps as much as $200 a barrel.
In addition, as oil prices rise, so does the attractiveness of Russian oil. For example, there is currently a huge incentive for Asian countries such as India to buy discounted Russian oil.
In other words, it’s a classic Catch-22, an absurd paradox. In trying to punish Russia by banning Russian oil from the market, Russia is enjoying the net benefit of higher oil revenues.
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