The soaring price of oil could render Western sanctions on Russia ineffective as the booming cost of crude allows the country to rake in billions.
Every $10 increase in oil prices provides an extra £15.2billion ($20billion) for the Kremlin’s coffers each year, according to an analysis from Elina Ribakova, deputy chief economist at the Institute of International Finance.
Despite imports of Russian oil having collapsed following its invasion of Ukraine, Ribakova estimated that the country could still rake in over £152billion ($200billion) this year.
A ‘nodding donkey’-type oil pump in Russia’s Tatarstan region. Despite imports of Russian oil having collapsed the country could still rake in over £152bn ($200bn) this year
Around 40 per cent of the £488billion ($640billion) in reserves held by Russia’s central bank have been frozen by various countries as part of sanctions packages imposed in reaction to Vladimir Putin’s decision to attack Ukraine.
However, the ability of Russia to keep selling its oil at elevated prices means most of this shortfall, worth around £195billion ($256billion), could be offset by the cash influx.
The situation provides a large loophole for Putin to rebuild his war chest and prop up the Russian economy.
It is also likely to increase calls for a ban on the buying of Russian energy despite resistance from several countries, including the UK and Germany.
Continental Europe relies heavily on Russian gas to keep its lights on, meaning any sanctions on the sector would likely fuel the surge in household energy bills.
Meanwhile, over the weekend, American diplomats flew to Venezuela, the most oil-rich nation in the world, to negotiate the easing of US sanctions in return for higher crude exports.
