Tankers based in the waters near Ceuta, Spain are carrying oil from Russia to reach Asian markets despite Western sanctions.

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Russia’s oil revenue rebounded in March and April to hit the highest level since November last year, according to a new report that boosted President Vladimir Putinability to finance the onslaught of the Kremlin in Ukraine.

An analysis released Wednesday by the Center for Energy and Clean Air Research, an independent Finnish think tank, found that Russia’s oil export earnings have recovered from levels reached in January and February.

The findings show that Moscow has recently managed to successfully recoup profits from fossil fuel exports, despite the imposition of import bans late last year from the European Union and a broader G7 oil price cap.

It comes less than a week after the Group of Seven leaders he said at the end of the summit in Hiroshima, Japan, that the price ceiling on Russian oil and oil products is working, Russian revenues are falling, and falling oil and gas prices are benefiting countries around the world.

The developments in April were primarily a warning of what was to come if action was not taken.

Lauri Myllyvirta

Senior analyst at the Center for Energy and Clean Air Research

Energy analysts at CREA suggested that the failure of the so-called Price Cap Coalition to revise price levels and enforce the policy had resulted in the measure “losing traction, integrity and credibility”.

“Russia’s export earnings fell significantly year-on-year in April, mainly due to the impact of the EU import ban and lower oil prices. This means that the Russian budget is likely to remain in deficit, which will limit military spending,” said Lauri Myllyvirta. chief analyst at CREA and co-author of the report.

“However, Russia was able to export its main oil variety for the first time at prices that were systematically above the price ceiling level set by the US, the EU and allies,” he added, adding that this revealed “large gaps”. in enforcing the price ceiling policy.

“If the loopholes in enforcement are not quickly closed, they threaten to break the price cap mechanism for good. This in turn would increase Russia’s expected tax revenues and make the invasion much easier to sustain. So the developments in April were primarily, a warning of what was to come, unless action is taken,” Myllyvirta said.

A spokesman for the European Union declined to comment when contacted by CNBC.

The recovery of Russian oil revenues is expected to continue

At the beginning of the year dates showed Russia’s fossil fuel export earnings plunged in December. It appeared to underscore the effectiveness of politicians targeting Russia’s oil revenues and prompted calls for even tougher measures to help Kiev win.

However, CREA’s latest findings show that oil tax revenue in Russia rose 6% month-on-month in April due to a rise in export earnings in March.

Of course, the Kremlin’s income was well below the levels seen in April of last year, when oil prices jumped.

A rise in export earnings in March led to a 5% month-on-month recovery in Russian mineral tax revenue in April, the report said – and an even bigger increase is expected in May.

It means that after bottoming out in early 2023, Russia’s oil tax revenue has since recovered thanks to increased sales.

On May 22, 2023, Russian President Vladimir Putin met with Supreme Court President Vyacheslav Lebedev in the Kremlin in Moscow.

Mikhail Klimentyev | Afp | Getty Images

“The Kremlin’s tax revenues have closely followed Russian oil prices, underscoring the importance of the oil price ceiling. The state is also changing its tax regime to mitigate the impact of the price ceiling,” said Isaac Levi, energy analyst at CREA.

“Unless the price cap coalition takes action to lower the price cap and close enforcement gaps, changes to Russia’s oil taxation structure will force the price of Russian oil closer to international benchmarks, leading to a further recovery in Russian oil revenues and a wholesale default. price ceiling system,” he added.

The CREA analysis said Moscow has earned an estimated 58 billion euros ($62.5 billion) in marine oil export revenue since the EU import ban and the G7 price cap on Russian oil.

Most of them were transported on European insured or owned tankers, he added. Russia’s revenues could be reduced by another 22 billion euros if the price ceiling for oil were lowered to $30 a barrel and the price ceilings for petroleum products were revised accordingly, CREA said.

What is the purpose of a price cap?

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