Russia Tries to Manipulate Oil Prices Amid Western Sanctions

Russia recently announced that it will reduce oil output by 500,000 barrels per day starting in March, in response to Western sanctions imposed on its energy exports.[0] According to a report from researchers at Columbia University, the Institute of International Finance, University of California, Los Angeles, and IE University, Russia was able to reroute crude oil exports from Europe to alternative markets such as India, China, and Turkey.[1] However, this came at a cost as the exporters had to accept sizable discounts in market segments where the EU embargo decreased demand.[2]

The sanctions imposed by the EU and G7, which came into effect in December and February respectively, include a ban on imports of seaborne Russian crude oil and a price cap of $100 per barrel on premium Russian oil products such as diesel, and a price cap of $45 per barrel on discounted products such as fuel oil.[3]

Goldman Sachs noted that Russian oil importers have been paying more to offset Western sanctions, leading to a gap between the average effective price paid and the quoted crude price that has been widening since March 2020 and reached around $25 per barrel in December.[4] This has been cushioning Russia from the impact of the sanctions and has allowed the country to remain resilient in the face of unprecedented Western sanctions.[5]

China, India, and Turkey have become increasingly reliant on Russian oil and have been ramping up purchases to partially offset the 400,000-barrel-per-day fall in Russian crude exports to Europe in January.[6] Europe is also still importing Russian oil and gas via pipeline or as LNG.[7]

Russia is interested in a large rise in oil prices, as it would not only boost Moscow’s revenues by making up for reduced exports, it would also cause further misery on inflation-hit Western economies.[8]

However, Russia has to be careful not to overdo it, as OPEC’s stance might shift if Russia uses additional production cutbacks, as this could raise oil prices to a point where they threaten demand.[9] Additionally, Russia lacks adequate storage facilities at home, and it is expensive to store Russian oil overseas in locations like Fujairah in the United Arab Emirates, where Russian oil stocks are rising.[8]

Overall, Russia is attempting to manipulate oil prices to its advantage in the midst of the sanctions imposed by the West. It remains to be seen whether or not OPEC will be able to stop Russia from doing so.

0. “Oil rates surge due to worries around Russian provision redu…” MENAFN.COM, 23 Feb. 2023,

1. “Researchers say oil price cap imposed on Russia’s didn’t exactly work” Insider, 25 Feb. 2023,

2. “Academics Russia Selling Oil Way Over Price Cap”, 24 Feb. 2023,

3. “Shell and Vitol accused of prolonging Ukraine war with sanctions ‘loophole’” The Guardian, 20 Feb. 2023,

4. “Goldman Sachs says that Russian oil importers pay more to of…” MENAFN.COM, 21 Feb. 2023,

5. “Goldman Russia May Have Received More For Its Crude Than Quoted Prices Suggest”, 19 Feb. 2023,

6. “Russia on Oil and Gold, what is the take?” FXStreet, 17 Feb. 2023,

7. “Daily Russian Fossil Fuel Revenues Still at $0.5 Billion” Statista, 24 Feb. 2023,

8. “After Gas, will Russia use Oil as a weapon?” Frontier India, 18 Feb. 2023,

9. “Trade diversion has helped ease the impact of the embargo on Russian oil” Federal Reserve Bank of Dallas, 21 Feb. 2023,