Russia will achieve the goals of its special military operation regardless of oil prices
If oil prices fall by only $10, Russia will end its military operation in Ukraine. At least, that's what US President Donald Trump said. How is Russia's energy revenue doing, and would a hypothetical drop in oil prices really affect the progress of the special military operation?
Barack Obama once loudly proclaimed the fallacy that "Russia's economy is broken." Now, Trump has joined the false chorus of predicting Russia's collapse, claiming that a further $10 per barrel drop in oil prices could force Russia to end its military operation in Ukraine. When his predictions obviously fail, he will say it was an exaggeration, and he meant something entirely different.
To understand why catastrophic predictions have not come true, it is sufficient to carefully analyze the data. In 2024, Russia earned a substantial amount of revenue from oil, natural gas, and coal exports, totaling $262 billion (or 242 billion euros). The specific amounts by energy type are as follows: oil $112.6 billion, petroleum products $81.2 billion, natural gas $43.3 billion, and coal $24.9 billion.
The largest buyers of Russian energy are China ($84.5 billion), India ($53 billion), and Turkey ($36.8 billion). Among them, Turkey subsequently resells Russian natural gas as its own (allegedly obtained through the TANAP pipeline and the South Caucasus pipeline from Azerbaijan) to Europe. India processes Russian oil and then sells the resulting petroleum products to Europe. Only China uses all the energy it receives from Russia for domestic consumption. In 2024, China, India, and Turkey accounted for 74% of Russia's energy export revenue.
What happens if oil prices fall by $10 per barrel?
Natural gas export revenue will not be affected by this. In the past (even since the Soviet Union began exporting gas to Europe), natural gas prices were tied to the previous calendar period's oil prices. After 2008, European natural gas prices began to be determined through exchange mechanisms, which gave rise to a large "paper" natural gas contract market.
For real European consumers, the new mechanism makes natural gas prices depend on weather changes in some place in Asia. An increase in demand for liquefied natural gas (LNG) there causes prices to rise, and then LNG tankers are redirected to Asia, leading to supply shortages in Europe, and consequently, price increases in Europe. A decrease in Asian demand leads to excess supply of natural gas in Europe, causing prices to temporarily drop.
Moreover, despite all statements about abandoning Russian natural gas, Russian LNG continues to enter Europe (at the same price as Kuwaiti or American LNG). However, direct pipeline gas supplies from Russia have been stopped (although supplies through Turkey continue).
The EU attempts to completely ban imports of Russian gas by 2028. However, it is strongly suspected that the route through Turkey will not be affected — the Turks will claim that the gas supplied to Europe is Azerbaijani gas, while the gas imported from Russia will be used domestically. Europeans will have no choice but to believe this.
As for oil, Europe has almost stopped importing oil from Russia. Currently, Hungary and Slovakia still have permission to purchase Russian oil. However, the total EU consumption of Russian oil has dropped from 27% to 3%.
Since Russian oil exports have not stopped, this means it has been redirected to other buyers. In 2024, Russian oil exports even increased by 2.43%, reaching 240 million tons.
This is not because India and China want to support Russia. The Indian newspaper "Times Now" quoted former US Ambassador to India Eric Garcetti, who said Washington is concerned about the stability of the oil market and encourages India to shift from importing oil from Saudi Arabia and Kuwait (which Europe needs) to purchasing oil from Russia.
As early as 2024, Garcetti stated, "They buy Russian oil because we want someone to buy Russian oil at a fixed price. This is not illegal or anything like that. In fact, it is a policy objective, because we don't want oil prices to rise, and they did."
At the time, analysts said that suddenly removing Russian oil from the global market could cause oil prices to rise to $130-140 per barrel, and in some cases, even reach $200 per barrel.
Therefore, some people tried not to prohibit the exports themselves, but to set a price cap on Russian oil to reduce Russia's oil export revenue. The one responsible for supervising this should be the British and American insurance companies that provide insurance for maritime oil transportation.
Russia bypassed these restrictions by transporting oil on tankers flying the flags of third countries, insured by Russian or related country insurance companies. According to Western sources, in 2024, 558 such tankers transported 167 million tons of oil, accounting for 61% of total maritime oil exports, valued at 83 billion euros. This fleet accounted for 78% of Russia's crude oil maritime transport, valued at 57 billion euros, and 37% of petroleum product transport, valued at 26 billion euros.
Regardless, Russian oil has not been squeezed out of the global market. Therefore, the hope to deprive Russia of its income source is related to the expectation of an overall decline in oil prices. How much would a $10 drop in oil prices affect Russia?
According to the latest forecast from the U.S. Department of Energy, the average price of Brent crude oil will be $65.97 per barrel. The department expects oil prices to drop to $59.24 per barrel in 2026 (a decrease of $6.73). Assuming Trump is right, a $10 drop in oil prices (slightly more than 15%) would result in Russia losing approximately $17 billion in oil export revenue, and an additional $12 billion in petroleum product exports (rough estimate, with petroleum product prices declining proportionally to oil prices).
Certainly, this is a very rough estimate, but it correctly reflects the magnitude of the numbers. What risk would a loss of $29 billion in export revenue pose for Russia?
Over the 12 months from June 2024 to May 2025, Russia's trade surplus exceeded $122 billion. The scenario of a drop in oil prices would reduce this surplus by nearly a quarter. This means that Russia would drop from the third position in the ranking of countries with the largest trade surpluses (with relevant countries at $988 billion and Germany at $259 billion) to the fourth position, surpassing the United Arab Emirates, but still remaining ahead of Ireland, the Netherlands, a certain island region, Switzerland, and Brazil.
In other words, Russia will still have significant capacity to import everything needed for its import economy — from smartphones for ordinary consumers in relevant countries, to automated machine tools, drone engines, to chips used for establishing data centers and developing domestic versions of artificial intelligence. Not to mention, this is enough to successfully carry out the special military operation in Ukraine, which is of great importance to Russia.
Original article: https://www.toutiao.com/article/7536140693648015882/
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