WIREDGOV

The loss of European gas pipeline markets has had a profound effect on Gazprom’s – and therefore the Russian state’s – revenue stream. Replacing this lost market will likely drive Gazprom to pivot towards increased pipeline sales to China and increased liquified natural gas sales. This realignment will require substantial infrastructure investment and technical expertise, and will not be a quick fix. This has implications for Russian state finances and the funding of the war in Ukraine.

Russia has historically been a significant exporter of all forms of energy, including crude oil, refined products, coal and natural gas, and at the end of 2020 was in possession of a substantial proportion of the world’s fossil fuels. Proven reserves as a percentage of the worldwide total were in the region of 6.2% for oil and 19.9% for gas, giving Russia the largest proportion of worldwide gas reserves.

In 2021 – the year prior to the invasion of Ukraine – of Russia’s worldwide oil exports, approximately 53% of crude and 54% of oil products were exported to Europe. Following the Russian invasion of Ukraine in February 2022, and with the announcement of EU sanctions and commitments to reduce Russian imports, Russia has had to look for other markets in which to place its products. Moving oil and oil products can be managed relatively easily, with Russian oil and oil product sales to Europe and the US being displaced over the period from January 2022 to January 2023 largely by sales to India, and to a lesser extent to China and Turkey. By February 2023, Europe’s share of Russian oil exports had dropped to approximately 8% from above 50% in 2021.

Click here for the full press release