This is not surprising, since Russia has been exporting oil to Europe since the 1870s. A glance at the map reveals that Russia’s export infrastructure of pipelines, railways and sea terminals skews heavily to the West. The first of these vulnerabilities is Russia’s limited ability to redirect its Western export volumes to other markets. What’s more, they could also fund reparations to Ukraine at Russia’s expense. But, if properly leveraged, they enable the West to design smart sanctions that could slash Russia’s oil revenues while also averting an oil price shock. Such limitations have been largely overlooked in recent sanction debates. These constraints arise from the sheer scale and inherent inflexibility in Russia’s system of production and transportation.
When it comes to its oil exports to the West, Russia faces limits on its ability to redirect or reduce these volumes. Mikhail Klimentyev, Sputnik, Kremlin Pool Photo via AP Russian President Vladimir Putin chairs a meeting on the situation in the oil and gas sector via videoconference at the Novo-Ogaryovo residence outside Moscow, Russia, on April 14, 2022. A ban could trigger an oil price shock that would plunge the world economy into recession, drive up global food costs and weaken unity among Ukraine’s allies.
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EU policymakers have signaled some desire to follow suit, but they’ve struggled to agree on how to implement an embargo that avoids excessive self-harm. But in the aftermath of Russian atrocities in Bucha and elsewhere, support has swelled for an embargo on Russian oil exports - the Kremlin’s single largest source of government funding. As recently as late February, when the first new round of sanctions was announced, the West made clear they did not apply to energy exports. Putin appears to have been caught off guard by the recent shift in Western sentiment toward a Russian oil embargo, and perhaps with good reason. But the main challenge he was trying to address seemed like a new one for him: What does Russia do if the West stops buying its oil? The agenda for this meeting was to find solutions to what was euphemistically termed “ the current situation in the oil and gas sector.” Looking tired and twitchy at times, Putin rattled off a list of problems plaguing Russia’s most strategically important industry. He is writing a book on the history of Russian oil and civil society.Īs the Russian naval cruiser Moskva was engulfed in flames on the Black Sea earlier this month, Vladimir Putin gathered with senior ministers to deal with a different unwelcome consequence of his war on Ukraine - one far less dramatic than the sinking of a flagship but more dangerous to the ultimate strength of his regime. Craig Kennedy is a former global finance and energy professional, an associate at Harvard’s Davis Center and the author of the newsletter Navigating Russia.
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