Since the onset of Russia’s full-scale invasion of Ukraine in February 2022, the country has generated over €883 billion ($973 billion, £740 billion) from fossil fuel exports. As a result, this significant revenue stream is now extremely important to continuing Russia’s military efforts. Sanctions from countries including the United States and United Kingdom have prohibited Russian oil and gas. The tactic taken by the European Union has allowed Russia to continue raking in billions of dollars from its energy exports.
Israeli-based advocacy organization, the Centre for Research on Energy and Clean Air (CREA), found a jaw-dropping number. An estimated €228 billion of this money has gone from fossil fuel exports to countries that sanctioned Russia. By 2024, Russian liquefied natural gas (LNG) exports that year were still 50% EU. The EU’s overall consumption of Russian LNG has fallen to below 5%. The complex global energy market still allows Russia to rake in billions from its energy,” said Under Secretary of State for Political Affairs David Hale.
CREA’s researchers have traced Russian crude oil through a number of major “laundromat refineries” based in Turkey and India. These facilities are vital in turning Russian crude into refined products. This convoluted process has resulted in a staggering €6.1 billion in exports to sanctioning countries. This loophole in the sanctions regime has raised concerns among analysts and policymakers, highlighting the challenges in effectively countering Russia’s energy revenues.
The continuing war has hit Russia’s fossil fuel revenues hard, costing an estimated 5% less than in 2023. To make matters worse, export volumes are down 6%. These minor decreases are signs of a robust, dynamic and adaptable energy economy. Yet it continues to flourish despite the international campaign to curb its activities. Russia’s production costs are about half of OPEC heavyweights like Saudi Arabia. That natural benefit increases its advantage in the global market.
Vaibhav Raghunandan, an expert on energy markets, noted, “These countries know that sanctioning countries are willing to accept this. This is a loophole. It’s entirely legal. Everyone’s aware of it, but nobody is doing much to actually tackle it in a big way.” In an interconnected world, this commentary illustrates the delicate balancing act every nation must navigate. They need to weigh their energy demands against the geopolitical fallout of propping up an aggressor.
By January/February 2025, foreign gas exports from Russia to Europe had surged. They were up a whopping 26.77% over the same time in 2024. Indeed, estimates indicate that gas exports to Europe increased by up to 20% in 2024. Significant drivers of growth LNG shipments ramped up to all-time highs in this period. This trend further demonstrates the complexities that countries imposing sanctions face. Like their European counterparts, they’re working to manage the tradeoffs between dependence on global energy and the obvious desire to reduce dependence on Russian supplies.
The European Union’s recent decision to cut Russian seaborne crude imports has had the opposite effect. “Fifty percent of their LNG exports are directed towards the European Union, and only 5% of the EU’s total [LNG] gas consumption in 2024 was from Russia,” Raghunandan explained. “So if the EU decides to completely cut off Russian gas, it’s going to hurt Russia way more than it’s going to hurt consumers in the European Union.” This view highlights an important path to cutting off Russia’s revenue spigot without inflicting pain on Americans and allies at home.
Many governments seem unwilling to take deeper measures to restrict Russia’s exports and continued production of energy. “There’s no real desire in many governments to actually limit Russia’s ability to produce and sell oil,” stated Mai Rosner, an energy policy analyst. “There is way too much fear about what that would mean for global energy markets.” This fear makes it exceedingly difficult to punish effectively a country that is still extraordinarily embedded in global supply chains.
In a wider world, some experts argue that fossil fuel revenues are enabling a persistent cycle of conflict. Rosner remarked, “We now have a situation in which we are funding the aggressor in a war that we’re condemning and funding the resistance to the war.” This dichotomy reflects an uncomfortable reality for Western nations grappling with their role in both supporting Ukraine and inadvertently bolstering Russia through energy purchases.
The geopolitical and military reality of the global oil and gas markets is not lost on government insiders and industry experts. Vladimir Milov, a former Russian Deputy Energy Minister, focused on the challenges in sanctioning Russia’s energy sector. That’s a pretty complicated surgery production,” he said. “You need to periodically release batches of new sanctioned vessels, shell companies, traders, insurers etc. every several weeks.” This constant game of whack-a-mole between regulators and those trying to take advantage of a loophole highlights how hard it is to enforce successful sanctions.