Assessing the Impact of International Sanctions on Russian Oil Exports

31 Pages Posted: 1 Mar 2023

See all articles by Tania Babina

Tania Babina

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Benjamin Hilgenstock

KSE Institute

Oleg Itskhoki

University of California, Los Angeles (UCLA)

Maxim Mironov

IE Business School, IE University

Elina Ribakova

Peterson Institute for International Economics; Bruegel; Kyiv School of Economics

Date Written: February 23, 2023

Abstract

We use a unique high-frequency Russian customs dataset to evaluate the impact of international sanctions on Russia – focusing on Russian crude oil and oil products exports, as they are the key sources of export earnings and government revenues. We study the effects of two focal sanctions measures – the EU embargo and G7 price cap on Russian seaborne crude oil, which both took effect on December 5, 2022. We find that Russia was able to redirect crude oil exports from Europe to alternative markets such as India, China, and Turkey but that export earnings were curbed substantially by the sizable discounts that Russian exporters had to accept in market segments where the impeding EU embargo lowered demand, e.g., exports from Baltic Sea ports – a dynamic that only became more pronounced after the embargo and price cap’s taking effect. However, we do not find crude oil discounts as large as those reflected in Urals prices towards the end of 2022. In particular, prices in market segments that are unaffected by lower European demand, e.g., exports from Russia’s Pacific Ocean ports, have not dropped in a meaningful way and shipments do not appear to comply with the price cap. What the EU embargo and G7 price cap have, thus, triggered is a fundamental fragmentation of the market for Russian crude oil. Based on our analysis, we conclude that a central focus of policy going forward should be the enforcement of existing sanctions on Russian oil – along with the lowering of the oil price cap. As far as oil products are concerned, we show that it is significantly less feasible to redirect exports away from the European market. This suggests that the EU embargo on oil products, which took effect on February 5, 2023, will prove to be a powerful additional tool to further curb Russian export and fiscal revenues.

Keywords: Russia Invasion of Ukraine, Russian Oil Exports, Sanctions

Suggested Citation

Babina, Tania and Hilgenstock, Benjamin and Itskhoki, Oleg and Mironov, Maxim and Ribakova, Elina, Assessing the Impact of International Sanctions on Russian Oil Exports (February 23, 2023). Available at SSRN: https://ssrn.com/abstract=4366337 or http://dx.doi.org/10.2139/ssrn.4366337

Tania Babina (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

HOME PAGE: http://taniababina.com

Benjamin Hilgenstock

KSE Institute ( email )

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Kyiv, 02000
Ukraine

Oleg Itskhoki

University of California, Los Angeles (UCLA) ( email )

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Box 951361
Los Angeles, CA 90095
United States

Maxim Mironov

IE Business School, IE University ( email )

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Spain

Elina Ribakova

Peterson Institute for International Economics ( email )

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Washington, DC 20036
United States

Bruegel ( email )

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Belgium

Kyiv School of Economics ( email )

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Kyiv, 04119
Ukraine

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