Presented by Yuliia Pavytska, Manager of the Sanctions Programme at KSE Institute, during SITE 2023 Development Day conference.

1. How to Undermine the Russian
War Effort and Support Ukraine
Reducing Russian Government Revenues
Yuliia Pavytska — Manager of Sanctions Program, KSE Institute

2. Sanctions have weakened fiscal stability, but in recent months pressure started to vanish
How to Underminethe Russian War Effort and Support Ukraine
Reducing Russian Government Revenues
Source: Ministry of Finance, KSE Institute
• Energy sanctions have cost Russia at least $100 bn in oil export earnings since February 24, 2022.
• Revenues of the largest Russian oil & gas companies fellby 41% y/y for the 9M 2023.
• However, rebound in O&G revenues has led to a marked improvementin the federalgovernmentbudget.
Federalgovernmentbalance,in ruble bn
Yuliia Pavytska — Manager of Sanctions Program, KSE Institute
Source: Ministry of Finance, KSE Institute
Federalbudgetoil and gas revenues,in ruble bn

3. With oil & gas earnings rising, Russia regains capability to scale war expenditures
Source: International Energy Agency, KSE Institute
Federalgovernmentmilitary spending
Source: Ministry of Finance, KSE Institute
Discountof Russian exportprices vs.Brent,in U.S. dollar/bbl
How to Underminethe Russian War Effort and Support Ukraine
Reducing Russian Government Revenues
• A major reason for rebounding revenues – narrowing Urals discount, the key channel though which energy sanctions worked
• At the same time global oil prices rose as well; 10$/bbl rise in oil price results in $18-20 bn of additional export earning to Russia
• Against this backdrop,the Russian governmentis now set to spend ~$100 bn on the military in 2024 (+68% vs. this year)
Yuliia Pavytska — Manager of Sanctions Program, KSE Institute

4. Price cap challenges need to be addressed to ensure effectiveness and credibility
Source: Kpler, P&I Clubs, Russian authorities, KSE Institute
Volume share transportedwith G7/EU involvement,in %
Source: Kpler, P&I Clubs, KSE Institute
Distributionof seaborne crude oil exports in October2023
How to Underminethe Russian War Effort and Support Ukraine
Reducing Russian Government Revenues
• Octoberdata shows that almost all seaborne exports of Russian crude oil took place above the price cap’s $60/barrelthreshold.
• At the same time, close to 30% were exported with the involvement of service providers from G7/EU countries.
• This is clear evidence that price cap violations in the form of “attestation fraud” are widespread and enforcementneeds to be steppedup.
• More fundamentally, however, the price cap’s leverage is under threat as Russia increasingly relies on a “shadowfleet” of tankers.
Yuliia Pavytska — Manager of Sanctions Program, KSE Institute

5. Another point of urgency – mitigating ecological risks from Russia's shadow
Source: Kpler, KSE Institute, Craig Kennedy, “Measuring the Shadows”
Near-ecologicaldisasterin the Baltic Sea in May 2023
Source: Craig Kennedy, “Measuring the Shadows”
Exportroutesfor Russian oil, in %, Sep-Oct2023
How to Underminethe Russian War Effort and Support Ukraine
Reducing Russian Government Revenues
• 47% of Russia’s seaborne oil exports went through the Baltic Sea – and 24% through the Black Sea – in September-October2023.
• We count more than 278 tanker voyages in Octoberin the two regions,142 of which involved ageing and under-insured shadow tankers.
• This represents a significant environmental risk in EU territorial waters and coastal states will likely be stuck with clean-up costs.
• In fact, a major spill almost occurred in May 2023 when an 18-year-old tanker came close to running aground in the Danish Straits.
Yuliia Pavytska — Manager of Sanctions Program, KSE Institute
47% via
Baltic Sea
24% via
Black Sea

6. What to do next? Enforcing the price cap and ensuring its leverage
How to Underminethe Russian War Effort and Support Ukraine
Reducing Russian Government Revenues
• G7/EU authorities should ensure that they – and service providers in their jurisdictions – have sufficient proof of oil sales
prices and can effectively implement the price cap.
• EU coastal states should leverage geographical “choke points” to limit Russia’s use of a “shadow fleet” of tankers not
subject to the price cap by requiring proper spill insurance for vessels’ passage through their territorial waters.
• Price cap coalition countries should step up penalties on entities that violate the price cap or facilitate such violations.
• Shipowners from G7/EU countries should be prohibited from selling used tankers to Russia – or to any buyers whose
ultimate beneficial ownership is not fully disclosed.
Yuliia Pavytska — Manager of Sanctions Program, KSE Institute

7. How to Undermine the Russian
War Effort and Support Ukraine
Reducing Russian Government Revenues
Yuliia Pavytska — Manager of Sanctions Program, KSE Institute