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It Turns Out That Western Sanctions On Russia’s Booming Oil Industry May Be Falling Flat

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The West has sought to crack down on Russia’s oil sector through crippling sanctions in response to the country’s invasion of Ukraine, but new data indicates that a key goal of the sanctions is not being achieved, Bloomberg News reported Monday.

The price for Russian Ural crude oil deliveries from a major Black Sea port to Asian buyers has fallen to its lowest mark since October 2023, while theoretical delivery costs — a metric that isolates the impacts of sanctions specifically — has also decreased, according to Bloomberg, which cites market research from a company called Argus Media. The price decreases allow Russian companies to keep a larger share of revenues earned from sales to buyers in China and India, and indicate that a key goal of the West’s massive sanctions package targeting Russia — increasing delivery costs — is not being met.

Russia is expected to rake in $9.4 billion in revenues from oil and gas in June alone, a 50% increase from the same period in 2023, Reuters reported.

Currently, it costs about $7.2 million to deliver one million barrels of Russian Ural crude to northern China by way of the Black Sea port of Novorossiysk, according to Bloomberg. As of early April, the same delivery would cost $10.4 million.

The part of those costs that are thought to be directly attributable to the West’s sanctions have also decreased, down to about $2.8 million from approximately $6.8 million in April, according to Bloomberg. Additionally, the per-barrel price premium on oil shipped from the Baltic Sea to India has fallen by about 45%, currently sitting at $4 after being as high as $7.40 in April.

The current cost of a barrel of Russian crude is about $75, well in excess of the $60 price cap imposed in response to Russia’s invasion of Ukraine, according to Bloomberg. In some cases, prices are even higher once the product reaches India and China, two markets that have become major buyers of Russian oil after the U.S. and its European allies imposed fresh sanctions.

The Biden administration has consistently touted Russian sanctions as an effective and deserved punishment in response to Russian President Vladimir Putin’s Ukraine war, though some observers have noted that the sanctions have not been as effective as advertised. 

Additionally, the administration appears to have made exceptions to its strong stance against Russia in order to advance its domestic political interests.

For example, some sanctions against the Russian energy sector have not been fully enforced due to the administration’s concerns about possible disruptions to the global oil market as the 2024 elections loom. Biden officials have also reportedly urged Ukrainian forces to refrain from striking Russian oil refineries because such attacks could drive up oil prices.

The State Department did not respond immediately to a request for comment.

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