Global Commitment to Russian Oil Sanctions Pays Off

What Happened?

In response to the Russian-occupation of Ukraine, on March 8th, the UK government pledged to phase out Russian oil imports by the end of 2022. In the pre-ceding 12 months (February 2021-January 2022), the UK imported a monthly average of £499 million of fuel from Russia. Russia marked the UK’s largest supplier of refined oil and a big contributor to UK’s crude oil imports at 24.1% and 5.9% respectively. By June, the UK had managed to phase out all Russian oil imports, instead turning to Saudi Arabia, Kuwait and the Netherlands. 

More broadly, Russian imports to the UK across all sectors are down by 97%, valued at only £33 million in June, marking the lowest figure since records began. This comes after the UK implemented a series of tariffs and sanctions on imports from and exports to Russia, most notably:

• a 35% import tariff on a range of goods such as cereals, spirits including vodka, fur skins, ships and boats, works of art and antiques, and railway containers, 
• a 15% import tariff on machinery including nuclear reactors, boilers and television image and sound recorders,
• an import ban on all iron and steel products, 
• a ban on UK exports of luxury goods to Russia, and
• an import ban on silver and high-end goods including wood products, pharmaceutical products, diamonds and caviar. 

More recently, the UK, along with the US, Canada and Japan have banned imports of Russian gold. Gold is a key export product in Russia with global exports exceeding £12.6 billion in 2021. 

The US has also imposed a total ban on Russian oil and gas imports whilst the EU have, more moderately, vowed to ban all Russian oil imports which come in by the sea by the end of 2022. It is estimated this move will lead to a cut in two-thirds of the EU’s oil imports.

Commercial Awareness Topics

What has the impact been on Russia?

Loss of oil revenue has hit Russia hard. Ordinarily, Russian export of oil makes up 17% of federal government revenue though taxation. As of March 2022, 70% of Russian oil was struggling to find a buyer. That said, Russia still earned £82.3 billion from its global oil and gas exports during the first 100 days of its invasion of Ukraine. The EU contributed 61% of these imports. However, analysts believe continuous global ostracization of Russian oil is now have an impact, with many predicting a deep recession. It is estimated that Russia has spent $876 million daily on its occupation of Ukraine. 

However, even where Russia has earned for the last few months of oil and gas exports, there have been delays in its own payments. Key developments include:

• the removal of major Russian banks from international financial messaging system Swift
• the US barring Russian debt payments from money held in US banks (estimated at $600 million) 
• a UK freeze on Russian bank assets and bar placed on Russian firms borrowing money.

As a result, Russia has defaulted on a debt for the first time since 1998. Russian finance ministers have argued that Russia does have the funds to pay but have not been given access to do. 

Talking points: How has the Russian occupation of the Ukraine changed the global oil landscape? Have there been limitations to what the sanctions have achieved? Are the impacts of these broad sanctions on Russian citizens justifiable, under the circumstances?