In April 2023, Russian oil exports surpassed pre-full-scale invasion levels, according to the latest ‘Russian Oil Tracker’ report by KSE Institute. The report highlights India and Turkey as significant importers of Russian oil and oil products due to shifts in export destinations. Strong demand continues to be fuelled by Russian energy discounts, while limited enforcement of sanctions poses challenges for the Kremlin’s revenue.

Despite all sanctions since the full-scale invasion of Ukraine, Russian crude oil exports exceeded pre-war levels in April 2023. After implementing a price ceiling for oil exports from Russian ports in December 2022, the export of Far Eastern and Arctic grades of Russian oil persisted at prices exceeding $60 per barrel, highlighting the ineffectiveness of the introduced price cap policy and the urgency for its improvement.

In addition, the Kremlin is actively using the so-called ‘shadow fleet’. According to estimates by KSE Institute experts, the Russian shadow fleet in April 2023 consisted of 143 tankers, with 105 of them being more than 15 years old. The utilization of this shadow fleet by the Russian Federation for oil and oil products export poses a significant environmental threat to EU countries. Specifically, tankers older than 15 years sail through the Danish Straits without P&I insurance, lacking the necessary funds to cover potential clean-up costs in case of oil spills along EU coastlines.

Despite all efforts to expand the ‘shadow fleet,‘ the Kremlin still relies on Western maritime services. Approximately half of crude oil and two-thirds of Russian oil products were shipped by tankers with P&I Club insurance, with 62% of crude oil exports from Black Sea ports utilizing this insurance.

Following the EU and G7 embargo on Russian seaborne oil, India has emerged as the largest buyer, witnessing imports surge from less than 0.1 million barrels per day to over 2.0 million barrels per day in March-April 2023. Additionally, Turkey has become a major importer of Russian oil products since the EU embargo was imposed in February 2023.

According to KSE Institute estimates, under current conditions, Kremlin’s oil export revenues are projected to decline to US$132 bn and US$105 bn in 2023 and 2024, respectively. If the price cap on Russian oil is lowered to $50 per barrel, annual revenues could drop to US$104 bn and US$51 bn in 2023 and 2024, respectively. In case of lax enforcement of the existing sanctions’ regime, Russia’s revenues from oil and oil products exports could reach robust US$164 bn and US$169 bn over the next two years.

In light of these developments, the Ukrainian government should assess the effectiveness of sanctions against the Russian Federation, persuade it allies to set new price caps for Russian oil and oil products, as well as evaluate the prospects of the Russian oil export sector. The situation calls for a comprehensive policy reassessment and enhanced international cooperation to address the challenges presented by the energy market.

The complete study ‘Russian Oil Tracker’ by KSE Institute experts is available at the following link