Russian President Vladimir Putin has signed a decree extending the country’s retaliatory measures against Western sanctions on its oil exports until June 30, 2025. This decree is a continuation of Russia’s response to the price cap imposed by the Group of Seven (G7) countries, the European Union, and Australia on Russian oil.
Initially, the decree was issued on December 27, 2022, banning the export of Russian oil and petroleum products under contracts that included the price ceiling.
The decree has been extended several times, with the latest update stating that the restrictions will remain in force until December 31, 2024. In December 2022, the European Union placed a price cap of $60 per barrel on Russian seaborne crude oil.
A similar price cap on petroleum products followed on February 5, 2023. Despite the imposition of these sanctions, Russia's oil and gas industry has shown remarkable resilience.
According to reports from local media, the revenue of Russia’s large and medium-sized oil and gas enterprises increased by 34.2 per cent year-on-year in the first half of 2024. This surge in revenue brought the total to 38.3 trillion rubles, roughly equivalent to $413 billion.
In addition to the oil and gas sector, Russia’s non-resource companies also experienced growth, with revenues rising by 19.5 per cent to reach 98.7 trillion rubles, or around $1 trillion.
This substantial growth in the revenue of Russia’s oil and gas sector can be attributed to several factors, including a weak ruble and the rise in global oil prices. The share of corporate revenue generated by the oil and gas sector rose from 26 per cent in the previous year to 28 per cent.
Overall, corporate turnover in Russia grew by 23.3 per cent, showing positive signs of recovery despite the continued sanctions.
The non-oil and gas sector also performed well, although the growth was more modest compared to the oil and gas sector. This sector, which accounted for 72 per cent of total revenue, grew by 19.5 per cent in the first half of 2024.
The recovery in this segment was particularly evident in the manufacturing industries, including metal products, electronics, and automotive manufacturing, which were major drivers of the growth.
Russia’s ability to sustain its oil and gas revenue despite the sanctions demonstrates the country’s economic resilience. The weak ruble, which has been one of the factors contributing to the rise in oil revenues, has made Russian exports cheaper for foreign buyers.
This, combined with rising global oil prices, has helped offset the impact of the sanctions on Russia’s economy.
While the extension of the price cap sanctions by the West may be seen as a strategy to pressure Russia, the country’s response indicates that it is adapting to the challenges posed by these sanctions.
The oil and gas sector, despite the difficulties, continues to play a central role in Russia’s economic performance. Additionally, the growth in non-resource sectors reflects a broader recovery in the Russian economy, with key industries adapting to the evolving global market conditions.
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