While the US, Iran, and Israel are currently engaged in warfare, Russia is oddly benefiting much in an economic way; Vladimir Putin is supposedly profiting approximately $760 million per day, approximately Rs 7150 crore from oil thanks to the effects of the global diminution of oil supply as a result of the war, which caused prices to increase sharply as a result of that same conflict disrupting the entire globe’s oil supply.
War Disruptions Drive Oil Prices Up
Due to conflicts in western Asia, especially at the Strait of Hormuz, where approximately 1/3 of the globe’s entire oil supply passes through, any interruptions will create ripples throughout the global supply and demand curves (and therefore prices). With the increase in tensions, the supply chain deteriorated, prices increased substantially, putting the world in an environmentally-more-friendly position with larger oil exporters like Russia.
So, by no surprise Russia has continued to export very large amounts of crude oil; even under Western sanctions from Russia’s Ukraine invasion. Although many other oil suppliers have ceased supplying crude oil to nations in need of their equivalent products, Russia’s crude oil supply has significantly increased due to higher levels of demand as compared to his competition. As their demand increases, so too shall Russia’s revenue.
A Continued High Demand for Russian Exports.
Many reports suggest that Putin is now earning over $760 million a day based on the increase in global demand for Russian crude oil due to the current situation.
However, generating more money from selling crude is not only about price increases; it’s also about strategy.
India and China Continue To Buy Russian Oil at Discounted Rates.
Russia has sold crude oil at discounted prices compared to global benchmarks for some time. As such, India and China have been able to purchase crude in significant quantities while remaining unaffected by the political climate that has affected many other countries purchasing crude oil from other regions, allowing Russia to sell its crude at discounted prices while maintaining significant export volume, despite the sanctions imposed on Russia.
At the same time, the war has forced many of the long-standing traditional buyers of crude from the Middle East and North Africa to seek alternate sources of crude due to fear of conflict and blockade of those supply routes, further bolstering Russia’s ability to continue supplying large quantities of crude oil to international markets.
Rising Crude Oil Prices Have Increased Russia’s Daily Revenues.
Prior to the current conflict’s price increases, early estimates indicated that Russia was already earning approximately $150 million per day from crude oil price increases associated with conflict. Now, with crude oil prices continuing to rise and increased demand coming from both India and China, Russia’s daily revenue from exporting crude oil has increased dramatically.
The war has caused a global energy shock like no other seen in decades, resulting in supply interruptions and price increases which are creating a highly uncertain environment from which oil producing countries will benefit from this situation even though they may not be directly involved in the conflict.
Suspended Revenues; Caution from Putin
Russia has been able to benefit economically through this situation. Putin has acknowledged the increase in revenue, but he has urged caution with the new found wealth. He cautioned Russians not to misuse their revenue and to use a moderately conservative approach to the wealth they have acquired.
Unstable Future Earnings
Putin’s call for caution gives credence to the belief that the current earnings are highly dependent upon global instability.
Meanwhile, the war continues to evolve. If the conflict were to become worse and key passageways such as Strait of Hormuz continue to be shut down, oil prices will stay at or near their current high prices, allowing Russia to continue to make very high revenues. However, if the war subsides and the supply chain stabilises, oil prices will drop, thus causing a decline in Russia’s revenue.
Khalid Qasid is a media enthusiast with a strong interest in documentary filmmaking. He holds a Master’s degree in Convergent Journalism from AJK MCRC. He has also written extensively on esports at Sportsdunia. Currently, he covers world and general news at NewsX Digital.
