Russian Oil Revenues Reached $74B, but This Only Masks the Ongoing Collapse of the Russian Economy.
The Russian economy is in tatters. Putin will bring the Russian people back to the Soviet era.
Since Vladimir Putin started his offensive on Ukraine on February 24, 2022, Russia is under Western sanctions. The waves of sanctions announced by America and the European Union against Putin's Russia have been countless. I believe we are in the seventh wave, but an eighth wave could come very soon.
These sanctions concern in particular Russian oil, the import of which is forbidden by the EU, with a few exceptions.
However, Russian oil is flowing on the market. Russia even produces as much oil as before the war in Ukraine. This seems to be an aberration and complete hypocrisy on the part of the West. Above all, it deserves an explanation that I will try to give you.
Western hypocrisy
America and Europe know this. They know that Russian oil is flowing on the market. However, they have decided to close their eyes, because the situation suits them. They already have to deal with the gas shock, they do not want to deal with an oil shock as well. This has allowed oil to fall by 30% in a few weeks despite the recent rebound linked to OPEC's willingness to reduce its production.
A little over six months after the start of the war in Ukraine, Russia has rebuilt its oil distribution channels around the world. Under the eyes of all.
Russia's oil revenues at the end of July 2022 reached 74 billion dollars. A colossal figure that is explained by the fact that the volume exported by Russia has returned to its pre-crisis levels and prices have increased. Russia is therefore benefiting from an increase in revenues.
How can Russia present an increase in its oil revenues?
The first thing that is undeniable is that Russian oil exports to Europe and even to America have been greatly reduced. However, they have not stopped as you might imagine.
In contrast, Russian oil exports to Asia and the Middle East have exploded. A new circuit has simply been set up. Russian oil goes through Asia and the Middle East, before returning partially to Europe and even America!
Let's take the example of a new route that appears toward Saudi Arabia and the United Arab Emirates. Passing through Egypt. This route is already used by Iran which is also under "sanctions". This may seem surprising when you know the relations between Saudi Arabia and Iran, but business always comes first as you can see.
Russian oil is going to be “laundered” in the Gulf countries. Then the labels are changed, and Europe can now import this oil from the Gulf. The United States knows this.
Sanctions are enforced, but all this laundering takes place on the high seas
Even though the major European and American banking institutions, trading houses, and intermediaries are enforcing the sanctions and have stopped financing or trading in Russian oil, smaller players have stepped into the breach and the entire infrastructure has been rebuilt in record time and new channels established with formidable efficiency.
From bases like Dubai or Singapore.
To change the “labels” and “launder” the oil, the Wall Street Journal also explains how the oil is transferred from one tanker to another, in the open sea, to disguise its origin. And everyone knows it.
So Russia has joined the parallel circuits of two other major oil producers under sanctions, Iran and Venezuela. India is also playing a very active role in this recycling and has even become Russia's best customer, with imports rising from zero to 1 million barrels a day.
As for China, it has never bothered much about the origin of the products it needs ...
However, it would be wrong to believe that Russia has absorbed the effects of the sanctions
From what I have just said, you might imagine that the Russian economy has absorbed the shock of the sanctions and is as strong as before the invasion. But it would be a mistake to believe this.
You should not confuse Russia's revenues with the Russian economy's channels. With the restoration of the oil circuits and the gas boom, Russia's revenues are largely up from 2021. This allows the Kremlin propaganda to strut around and say that Western sanctions do not affect the Russian economy.
But behind this smokescreen of revenues that will fall when the situation eases, the Russian economy is in tatters. The departure of European and American companies has major consequences on the Russian economy. Putin will thus impose on the Russian people a return to the Soviet era, 3 decades back.
Putin, who praises the Soviet era so much, is going to give his people ever more difficult living conditions, in the name of an unnecessary war. A war that he will probably end up losing and that could even cost him his place in the Kremlin. But that is another story ...
Some reading
Pariah of the West, Vassal of China, Putin’s Russia Is Already a Big Loser in the War in Ukraine. Putin has no way out because he knows that losing the war will mean losing power, if not life.
4 Billion People by 2100 — The World’s Population Could Be Cut in Half by the End of the Century. This is at least the thesis supported by James Pomeroy, an economist at HSBC.
This 8-Letter Word Alone Explains Why the Rich Keep Getting Richer While the Poor Keep Getting Poorer. It’s up to you to use the power of this magic word!
Cold War Between America and China — The New Space Race. The war in Ukraine started by Putin also upsets the balance in space.
With the Bear Market, the Specter of a Lehman Brothers on the Cryptocurrency Universe Is Resurfacing. The current crisis is reminiscent of the global financial crisis after the collapse of Lehman Brothers in late 2008.
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After setting forth an impressive and accurate of how Russia has avoided sanctions, you then come to this rather incongruous statement without a single citation or reference, "But behind this smokescreen of revenues that will fall when the situation eases, the Russian economy is in tatters. The departure of European and American companies has major consequences on the Russian economy. Putin will thus impose on the Russian people a return to the Soviet era, 3 decades back." We all know the US and UK left, but their personnel did not, they just continued their work under new organizational structures. The French and Italians have changed a few signs but they continue to operate. Whatever high tech the Russians were buying from the West they now get from China or a world-wide network of experts in avoiding sanctions. The result is much more likely to be a high tech revolution in Russia as they use their well educated population to replace what they import. BTW, my good friend says the recent increase in Mexican oil imports is provided courtesy of Russian oil off loaded in Veracruz daily. PEMEX is making a fortune and laughing all the way to the bank. Also, there has been an increase in the Mexican market for certain high tech goods. I say this because this is occurring world-wide. Remember, just 20% of the world is involved in sanctioning Russia. The rest are making money from it. The normal result of sanctions is to build home industries to replace sanctions. The best solution is the one I advocate to my Republican friends which is the partitioning of Ukraine with Russia and Poland leading to the restoration of the Lithuanian-Polish Commonwealth which provides a strong Catholic state as Europe's defense against any further Russidn aggression.