Russia is telling the world that it’s just a generous-hearted nation, and that’s why it has not turned off the spigot of natural gas exports to Europe despite economic sanctions from Western nations. Speaking with Sky News Arabia on September 20, Foreign Minister Sergey Lavrov said Russia has kept the energy flowing because Russians are “decent people” who have long-term, signed contracts with European nations.
Europe and the United States, by contrast, Lavrov said, do not honor their commitments.
Observers suspect Russia’s position has less to do with largesse and more to do with the fact that it cannot afford to lose any more revenue from energy exports. Prior to the invasion of Ukraine in 2022 that sparked the hot war between the two nations, Russia was the source for about 40 percent of the natural gas in Europe. But by the end of 2023, they were selling only 15 percent of the energy used by European nations. This was partially down to the acts of sabotage that damaged or destroyed several of the so-called Nord Stream pipelines that conduct gas from Russia to Europe.
Profits from oil and gas are down because of this damaged infrastructure and sanctions from Western countries that cap how much crude oil Russia can export, for example. Russia sold $94 billion in energy in 2023, which is about 25 percent less than in the prior year. The country thinks it’s set to sell more this year, but the price on oil has not been favorable for Russia. In addition, the sanctions, plus higher insurance costs, are taking a big bite out of the country’s energy profits.
There’s a point called a break-even price that companies have to meet if they’re at least not going to lose money. In 2021, the break-even price to Russia for a barrel of oil was $62. Today it’s $94 per barrel. The higher that price, the less is left over for profit.
There may be factors other than these that influence Russia’s decision to keep supplying energy to a hostile Europe, but it seems clear that Russia simply cannot afford not to. Despite the country claiming that it has a vigorous economy, outside observers question how stable Russia’s economic system really is. After all, the Oxford Institute for Energy Studies estimates that energy sales account for between 30 and 50 percent of Russia’s economy.
