Russian oil is currently being sold at significant discounts, impacting the financial stability of the country as President Vladimir Putin shows no signs of halting military operations in Ukraine.
In January, the average price of Russian Urals crude fell to approximately $37.50 per barrel, which is nearly 42% lower than the benchmark Brent crude. This price drop is attributed to intensified sanctions, logistical challenges, and a decrease in purchases from major buyers, particularly India.
According to reports, India’s imports of Russian crude oil have declined to 1.1 million barrels per day, marking the lowest level since November 2022.
This situation poses a critical challenge for the Russian budget, as oil revenues are the primary source of funding for the ongoing war. Additional pressure has come from U.S. sanctions against energy giants Rosneft and Lukoil, along with new EU restrictions on maritime transport of Russian crude oil.
Steffen Dietel from Altana Wealth noted, “If this trend continues, it will create significant problems for Putin, as maintaining the domestic economy relies heavily on high oil export revenues.”
As sanctions persist, exports are decreasing, and foreign currency inflows are diminishing, exacerbating financial strain within the economy. Experts estimate that the supply of Russian oil has already seen a noticeable reduction.
Decreasing demand forces Moscow to sell its crude at even lower prices to retain market access, further weakening the Kremlin’s budgetary capabilities and complicating war financing.
Despite declining revenues and rising inflationary pressures, the Russian government is attempting to support the economy through monetary stimulus. Analysts suggest that even with worsening economic conditions, the Kremlin remains committed to its strategic course, prioritizing the war despite the gradual depletion of financial resources.
Russian oil is being sold at unprecedented discounts, severely impacting the country's finances as it continues its military campaign in Ukraine. Despite economic challenges, the Kremlin remains focused on sustaining its war efforts.