Putin made a big bet that energy sales would fund his war in Ukraine. A new report shows that he was very wrong

Vladimir Putin’s hope that oil and gas revenues would help Russia’s economy weather the storm of sanctions over its invasion of Ukraine took a big hit in December, when Russian fossil fuel sales collapsed.

Russia’s fossil fuel export revenues fell 17% last month to their lowest level since before the war began, according to a study published Wednesday by the Centre for Research on Energy and Clean Air (CREA), an independent think tank based in Finland that focuses on energy and pollution.

After the EU imposed new restrictions on Russian energy in December, Russia’s net energy export revenues declined €160 million ($172 million) a day. Russia continues to rake in huge amounts from its fossil fuel trade—around €640 million ($689 million) daily—but the study found that even stricter policies against Russian energy would deal a devastating blow to the country’s economy, and potentially weaken Putin’s ability to maintain his costly war in Ukraine.

“The short-term windfall generated to Russia by sky-high fossil fuel prices in 2022 is starting to wear out,” the study’s authors wrote. “Further cuts to Kremlin’s revenue will therefore materially weaken the country’s ability to continue its assault and help bring the war to an end.”

Stricter measures

The decline in Russian fossil fuel revenues was partly a result of global consumption declining due to high prices, the CREA study found, but also because the EU expanded its sanctions to directly target Russian energy exports.

As of Dec. 5, EU vessels can no longer transport Russian crude oil. The ban will be extended to all petroleum products on Feb. 5, which will slash Russia’s oil revenues by another €120 million a day, CREA estimated.

The sanctions have already dug deep into Russia’s oil revenues, as crude oil exports fell 12% in December while crude oil revenues fell by a whopping 32%, the study found. The decline comes as a massive blow to Putin, as oil was among his biggest cash cows at the beginning of the war, while fossil fuel revenues constituted the “financial bloodline for Putin’s war,” Svitlana Romanko, founder of Razom We Stand, an organization seeking a full embargo on Russian fossil fuels, said in a statement accompanying the CREA study.