20221122 Will Russian income fall Image 01

Will Russian Income Fall if the EU Bans Imports of Russian Oil?

On Tuesday, November 22, 2022, Daniel Spiro, Associate Professor at Uppsala University, will be presenting his working paper focusing on the question: What is the effect on Russian oil profits if the EU bans the import of its oil? Join the SITE brown bag seminar to learn more.


Following Russia’s attack on Ukraine, the EU is planning to stop its imports of Russian oil. This paper answers the question: What is the effect on Russian oil profits if EU bans the import of its oil? To answer it, we use a simple but parsimonious model of the oil and shipping markets, taking into account both supply and demand changes, and quantify it using empirical estimates and compiled data from these markets. We find that an import embargo by itself will not have any effect on the amount of oil sold by Russia, but their costs of transport will increase since the distance to the market increases substantially implying a profit loss of around 2.5 MEUR per day. A tanker embargo – limiting the tankers that can ship Russian oil – may then become a strategic complement for the EU. It limits Russia’s transport capacity at a time when their transport needs increase. This squeezes Russia’s profit margins further and may ultimately limit the amount of oil they can sell. To assess this quantitatively we compile non-western controlled shipping and find that is equivalent to around 10% of the tanker market. This is sufficient to ship all Russian oil so their profits will fall by only 2.7 MEUR/day. In a counterfactual analysis, we find that if the tanker embargo can be extended to cover a few more percent, then Russia’s profit loss is likely around 22 MEUR/day, equivalent to a large part of its GDP. If, on top, India joins the embargo, profit losses are significantly higher at 60 MEUR/day. Thus, the different sanctioning tools and countries multiply the effects of each other.

About the Speaker

Daniel Spiro is a Senior Lecturer (Associate Professor, Lektor) in economics at Uppsala University in Sweden. His research is focused on environmental and resource economics, behavioral economics and political economics.

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