Presented by Daniel Spiro, Associate Professor, Department of Economics, Uppsala University, during SITE 2023 Development Day conference.

1. ENERGY-ECONOMIC WARFARE
Johan Gars, Beijer Institute of Ecological economics
Daniel Spiro, Uppsala University, Dept. of Economics
Henrik Wachtmeister, Uppsala University, Global energy systems Dept. of Earth Sciences

2. OVERALL QUESTION AND
APPROACH
 How should policy be designed during
energy-economic warfare?
Theoretical framework (Spiro, 2023)
1. Maximize your own income and the enemy’s
loss
2. Outline the enemy’s counter measures
3. The enemy will choose actions to minimize its
own cost and maximize your loss
Method: Energy-market data incorporated in

3. OIL IMPORT EMBARGO: TRANSPORT +
BARGAINING
Two effects:
1. Transport reshuffling
2. Weaker bargaining positionRussia gets lower price

4. Western ports: 4 mb/d
Eastern ports: 1.5 mb/d
East: 2.4 mb/d
West: 4.75 mb/d
Other: ~0.65 mb/d
Total exports: 7.8 mb/d
~4-7
days
~4-7
days
~3-7
days
OIL IMPORT EMBARGO : TRANSPORT

5. Western ports: 4.75 mb/d
Eastern ports: 1.5 mb/d
East: 2.4 mb/d
West: 4.75 mb/d
Other: ~0.65 mb/d
Total exports: 7.8 mb/d
~14 days
~3-7
days
~38 days
~45 days
OIL IMPORT EMBARGO : TRANSPORT

6. OIL IMPORT EMBARGO: TRANSPORT +
BARGAINING
Loss transport:
First year: 60M$/day ≈ 1% GDP
Now: 30M$/day ≈ 0,5% GDP
Bargaining loss: likely same ball-park (work in progress)
Invasion Embargo
Discount
Source:
Argus
Kepler
Spiro, Gars, Wachtmeister (in progress)
0
1000
2000
3000
4000
5000
6000
7000
0
5
10
15
20
25
30
35
40
45
50
Nov/21 May/22 Nov/22 May/23 Nov/23
Discount Urals to Brent (USD/bl) Average Russian cargo distance (Nautical miles)
Transport distance
$ NM

7. PRICE CAP: FIRST YEAR, 60
$/BARREL
• No production loss
• Global oil price unchanged
• China/India win
• Russian loss: up to 0.8% of GDP per 5$ reduction of cap
Source:
Rystad energy
Wachtmeister, Gars and Spiro (2023)
0
20
40
60
80
100
120
0 2000 4000 6000 8000 10000 12000
USD/bl
kbl/d
Production cost Russia (opex)
World price
Price cap

8. RUSSIAN RETALIATION, THREATS
AND COUNTERMOVES
 Export cuts:
 In ”normal” times possible: 10% cut  Russian net
benefits, but harms India, China
 Under price cap less likely
 Russia does not benefit from price effect
 has to value harming importers at least equally much as own
profits
 increasingly likely with tighter cap
 Against import embargo less likely: harms India,
China.
 Buying tankers YES
 Price cap can be evaded with Russian-owned tankers
Source:
Gars, Spiro and Wacthmeister (2023)
Wachtmeister, Gars and Spiro (2023)

9. THE TANKER MARKET
0
1000
2000
3000
4000
5000
6000
7000
0
10
20
30
40
50
Nov/21 May/22 Nov/22 May/23 Nov/23
Discount Urals to Brent (USD/bl) Average Russian cargo distance (Nautical miles)
0
1
2
3
4
5
6
7
Nov/21 May/22 Nov/22 May/23 Nov/23
CPC Tanker dirty Black Sea to Med 80kt USD/bl
Urals Tanker Baseline dirty Novorossiysk to west coast India 140kt USD/bl
Invasion Embargo Russia buys tankers
Source:
Argus
Kepler
Spiro, Gars, Wachtmeister (in progress)
Access to tankers:
Evading price cap ~10 $/bbl 1.5% GDP
Cheaper transport ~5$/bbl0.5% GDP
Greek
shipping
stops helping
Russia?
Embargo
longer transport
Price cap
expensive transport

10. Policy ahead
 Take control of tanker market
 No selling/repairing/admission to ports
 Shut Danish straits (price cap or for all)?
 Price cap has less bite but reinforces import embargo
 Keep/lower it.
 Enforce it
 Import embargo on oil is currently most important
sanction
 Implement gas/LNG embargo
 Control LNG tanker market
 Demand-side policies: reduce energy consumption
 Supply-side: increase own energy production of several

11. References
 ”The effect of European fuel-tax cuts on the oil income of Russia”, Nature energy, Gars et al,
2022
 ”Economic warfare”, Working paper, Spiro, 2023
 ”The Price cap on Russia oil, a quantitative analysis”, Working paper, Wachtmeister et al, 2023
 “Were Russia's threats of reduced oil exports credible?”, Working paper, Gars et al, 2023
 “Import and transport embargoes on Russian oil”, In progress, Spiro et al
 ”Market power and the Russian oil discount”, In progress, Spiro et al