Sanctions and ship seizures squeeze Russia's oil industry

In sign of Moscow's difficulties selling oil, millions of barrels are afloat, waiting for buyers

- Rebecca Feng

Russia will eventually have to slow production as storage space vanishes..

(AP)

Dozens of tankers filled with Russian oil are floating at sea without buyers.

Western powers are seizing the aging ships the country relies upon. Buyers of Russian oil are demanding the steepest discount to global oil prices since the early months of the war in Ukraine.

It all spells crunchtime from Moscow’s most important economic engine.

The West has tried to squeeze Russia's oil industry since President Vladimir Putin invaded Ukraine in 2022. Russia successfully evaded sanctions, rebuilt its own shadow shipping fleet and found new buyers for its crude.

But a fresh wave of pressure, a combination of European sanctions against specific ships, dramatic military ship seizures on the high seas, and President Trump’s efforts to put a wedge between Russia and India, have left Moscow’s most important industry in a precarious state.

Russia’s main grade of crude, known as Urals, trades for around $45 a barrel, a record $27 below the international benchmark Brent, according to commodities-data firm Argus Media.

That is already well below the $59 a barrel needed for Russia's fiscal budget to balance in 2026. And it is inching toward the production break-even price, below which Russian oil companies lose money. Analysts estimate this to be between $20 and $25 a barrel. In January, Russia’s oil and gas revenue was the lowest since July 2020.

“The vulnerability on the budget side is quite significant, and this is happening at a time when the economy is also slowing or almost stagnating,” said Benjamin Hilgenstock, director of the Center for Geoeco-nomics and Resilience at the Kyiv School of Economics Institute.