Russia’s oil and gas revenue plunged 40% in January as western sanctions take a toll, IEA says

Russia’s oil and gas revenue plunged 40% in January, a sign that the nation’s exports are feeling the squeeze of western sanctions, the International Energy Agency said.

According to IEA data, Russia’s oil and gas exports pulled in $18.5 billion in January – a 38% decline from January of last year, when the nation pulled in $30 billion, Reuters reported.

It’s a sign western sanctions are having their intended effect on Russia’s economy, particularly the European Union ban and $60 price cap on Russian crude that kicked in toward the end of 2022. 

“Our expectation is that this oil and gas revenue decline will be steeper in the next months to come. And even more steep in the mid-term, as a result of the lack of access to technology and investment,” IEA chief Fatih Birol told Reuters on Tuesday.

Russia has been battered by sanctions over the last year, since its invasion against Ukraine led to a barrage of trade restrictions from western nations and European customers shifted away from Russian gas and oil imports. 

Now, Russia is struggling to hand off its energy supplies after its crude and oil products have been shunned by European customers. There are just a handful of buyers of Russian crude left in the market, and nearly 2 million barrels of Russian diesel are stranded at sea due to a lack of buyers, according to Kpler data.

And while Putin has called the recent price cap on Russian crude “stupid,” the move has caused a $15 million loss for Moscow within the last week of 2022 alone, with Russia’s central bank describing the measure as an “economic shock” to its economy.

But estimates of the impact sanctions have on Moscow’s economy vary. One recent paper found that Russia is still able to sell most of its oil above the price cap, and demand for Russian crude outside of Europe has remained strong, thanks to Russia’s shadow fleet of tankers that are designed to circumvent sanctions.

The IEA has stayed optimistic over the effects of the sanctions, which are crimping Moscow’s war revenue while allowing Russian oil to flow to the international market, according the IEA’s head of oil industry and markets division Toril Bosoni. But Birol warned European customers still needed to remain vigilant on energy supplies, such as by pursuing renewable energy initiatives and building up natural gas storage.