Russia Policy Monitor No. 2648

Related Categories: Human Rights and Humanitarian Issues; International Economics and Trade; Warfare; Corruption; Resource Security; Russia; Ukraine

THINKING CREATIVELY ABOUT PENALIZING RUSSIA
With winter approaching and the Ukraine war nearing its third anniversary, experts in Europe are examining new and novel ways to expand pressure on the Kremlin. One possible strategy is to impose a "war tax" levying additional financial penalties on Russia's energy imports, a new study from the International Centre for Ukrainian Victory, a Kyiv-based policy think tank, has suggested.

"With... Russian growing military expenditures to be funded to large extent by selling oil and gas globally, and a lack of appetite of Ukraine's partners to allocate a larger share of their GDP to supporting Ukrainian victory, there is an urgent need to seek for creative solutions on how to decrease Russian war profits and provide the aid for Ukraine simultaneously easing the burden on Western taxpayers,” the study outlines.

"One effective strategy to address multiple issues simultaneously is the imposition of a war tax on Russian fossil fuel trade," it notes. Doing so, the study lays out, would bite into the more than $700 billion in revenue from fossil fuel exports that the Kremlin has received since February 2022. This, the report notes, is especially important in the European context, because while Western nations have collectively weaned themselves off of Russian crude and natural gas, "the EU remains the top consumer of Russian pipeline gas and LNG, with the latter supplies even increasing, which risks placing European energy security back into dependence on Russia, as well as keeps contributing to the Russian war machine financially." (ICUV, September 30, 2024)

TROUBLE IN THE RUSSIAN OIL TRADE
Russia's income from crude oil sales, on the other hand, is shrinking. According to Newsweek, revenue has now plunged to its lowest point in eight months, potentially threatening Vladimir Putin's war-driven spending plans. Former deputy energy minister Vladimir Milov has called the drop an "interesting trend," although it is as yet unclear whether it will persist. Western sanctions, including a price cap of $60 per barrel on Russian seaborne crude imposed by the G-7 in late 2022, have targeted the country's oil exports, which accounted for 16% of Russian GDP last year.

Russia has managed to evade some of the impact by employing a "shadow fleet" of vessels to carry its oil, and has ramped up its oil sales to countries like China and India, which are not abiding by the cap. Even so, recent reports show a sharp drop in crude shipments, with only 27 tankers carrying 20.23 million barrels for the week of September 22 - down from 31 ships the previous week. (Newsweek, September 25, 2024)

MOSCOW MEDDLES IN ARMENIA
Is the Kremlin trying to overthrow the government of Armenian prime minister Nikol Pashinyan? While Yerevan and Moscow have traditionally maintained warm relations, ties have recently soured, and this summer Pashinyan announced plans to exit the Russia-dominated Collective Security Treaty Organization (CSTO). In response, the Kremlin may be looking to replace the Armenian premier with a more compliant leader. Meduza reports that the Armenian government has successfully thwarted a coup attempt by a group of conspirators, at least some of whom were said to have been trained at military bases in Russia. The conspirators "were told that the purpose of the exercises was to return to the Republic of Armenia and overthrow the current government," a report by Armenia’s official Investigative Committee has laid out. (Meduza, September 18, 2024)

RUSSIA IS RUNNING OUT OF RESOURCES
While Russia has "immense natural resources," the deposits of minerals that are the most readily available and accessible are now in danger of being depleted in as little as a decade, notes Russia analyst Paul Goble. Writing in his Window on Eurasia blog, Goble cites a recent interview with Alexander Kozlov, the Russian Resources Minister, in which the latter warned that the deposits being most actively exploited by Russian industry are "almost exhausted."

The implications are potentially enormous - and costly – for the Kremlin. With conveniently-located mineral deposits running out, geologists will need "to explore new ones in far less accessible parts of the country," like the Russian Far East, Goble writes. That means "Russia will have to build expensive new infrastructure to allow the country to gain access to this mineral wealth, face the prospect of critical shortages or seek to import from abroad minerals that it is used to getting from domestic sources." (Window on Eurasia, September 11, 2024)