The Russian Federation has signaled once again that it does not expect serious harm to befall its fossil fuel industry amidst economic sanctions and international isolation, arguing that it will continue to find buyers, even if Europe and the United States cease doing business with Russian oil exporters.
“We will not persuade anyone to buy our oil and gas,” said Russian Foreign Minister Sergei Lavrov on March 10. “If they want to replace it with something, they are welcome, we will have supply markets, we already have them.”
While the international community has responded to Russia’s invasion of Ukraine with resounding disapproval, the economic isolation is not universal. Russia remains closely aligned with China, Cuba, Venezuela, Belarus, and Syria, and the country will likely continue trading with Turkey, which has become increasingly dependent on Russian exports in recent years.
Under the current, fragile state of the Turkish economy, the loss of Russian trade would likely be too onerous for the country. While Turkey produces about half of its wheat domestically, 85 percent of its wheat imports are derived from either Ukraine or Russia, and the country has been reluctant to condemn Russia or impose sanctions because of its own fragile economic situation (Turkey abstained from the vote to expel Russia from the Council of Europe).
However, Russia’s most crucial trade relationship is with China, home to the world’s second-largest economy, a state which accounts for 14.3 percent of all Russian exports, according to 2019 data from the Observatory of Economic Complexity. In the event of further economic isolation from the West, Russia will be incentivized to develop the infrastructure necessary to export resources such as minerals and fossil fuels to the rapidly growing Chinese economy, offering a pressure valve to its own sanction-imposed tribulations.
Russia has long attempted to project the narrative that it does not need access to Western markets as much as those markets need access to Russian resources. Germany in particular, having decided to shutter its nuclear program a decade ago, faces a dilemma: After investing in the Nord Stream 2 pipeline to import natural gas from Russia, Germany now finds itself with a looming dependence on Russian fuels, which may compromise the nation’s ability to hold firm on economic sanctions.
In theory, the sanctions could become counterproductive if Russian President Vladimir Putin leverages his situation tactically.
However, this is contingent on Russia finding sufficient buyers for its oil exports to offset the loss of Western markets due to sanctions. Right now, the limiting factor for Russian oil exports is not sanctions per se but a reluctance among oil companies to work with the nation, fearing shipping safety concerns and public outcry. On Friday, when Shell Plc purchased a cargo of Russian oil at a significant discount to international prices, the company was met with substantial criticism and backlash.
