The only thing that bothers Putin is that he did not come up with the sanctions against his country himself. It is still a lottery ticket. Never before did Russia earn so much from oil and gas as since the beginning of the war against Ukraine.
During that time, the EU announced numerous sanctions, including a total boycott of Russian oil and a phased cut in Russian gas purchases. Since fossil fuel exports account for 40 percent of Russia’s revenues, the economy should have collapsed as a result. That should have led to a mass uprising, the fall of Putin and the end of the war in Ukraine.
The latter is still possible. Quite a few Russians do not like the total isolation of the country. As a result, many western products are no longer available and part of the Russian business community is unable to export or import necessary parts.
But the government’s revenues are not affected. On the contrary, every boycott measure leads to further filling up the Russian treasury. The price increases exceed the volume loss. In the first five months of this year, Gazprom exported 54.5 billion cubic meters of gas to Europe, including Turkey, according to Energy Intelligence figures. That is 32 percent less than in 2021, also due to the fact that some countries do not want to pay in the required currency and are closed. The Russian government collected $12.4 billion in export duties for European countries alone. In 2021, which was also a record year, that was $15.3 billion. Gazprom’s own gas export revenues to Europe reached $46 billion in five months, compared to $52 billion in 2021 as a whole.
The Russian government also earned an additional $71.8 billion ($14.4 billion per month) from oil exports in the first five months. In the same period last year, it was $41.8 billion. In April 2022, the Russian government’s tax revenues were 31 percent higher than in April 2021. Since becoming president in 2001, Putin has been very successful in increasing the state’s share of oil and gas revenues at the expense of the oligarchs — with especially political opponents such as the well-known Mikhail Khodorkovsky, once Russia’s richest man.
Russia would shoot itself in the foot by shutting down exports. But by squeezing the supply to Europe every time, the price is pushed up, so that more can be earned with less gas. Nord Stream 1 will only run at 20 percent of capacity in the near future. There could still be a percentage off every month.
If the EU really wants to hit Putin, it will have to take control. That means that gas and oil needs must be reduced faster than Putin can squeeze it. Then not only will the volume fall, but the price and tax revenue will also fall. But for now, the EU cannot give Putin that sting.