Putin’s Oil Trick Exposed: How Russia Evades Sanctions

The West is fighting against Putin’s income. New sanctions hit Russian oil giants. But Russia is looking for ways to make up for the losses.

Munich – The West is struggling to find a common line against Vladimir Putin. Sanctions are primarily trying to stop the flow of oil. A price cap of 60 dollars and a comprehensive import ban in the EU should ensure this. It fell again in February. The G7 sanctions seem to be working. Already in December, Russia had to sell its oil at a discount of $24, around a third below the market price. 40 dollars for a barrel – a bargain price. But why can the Kremlin still keep paying for new missiles? For the answer, the industry service Argus Media provided us with price data for Russian oil of the Urals variety.

Shadow fleet and junk prices: The explosive game over Russia’s oil billions

Surprising: prices had already collapsed at the start of the war. “Even before official sanctions came into force, many traders began to avoid Russian cargo out of caution,” explains Kevin Schäfer, Managing Director of Argus Media Germany. The shock was great: almost $43 off the market price at the time Russia suffered its greatest losses in April 2022 – before the first sanctions even came into force in December 2022. This led to a paradoxical effect: Fear of shortages drove up global oil prices – and thus kept prices for Russia’s Urals crude oil stable. In 2022, oil and gas sales contributed a record amount of around $148 billion to the Russian budget, around 42 percent of the total budget, explains Simon Gerards Iglesias, a scientist at the Institute for Economic Research (IW).

Sanctions paradox: Russia’s oil revenues explode – then comes Trump’s hammer

In 2023, the sanctions took effect: Europe refused to accept that Western insurers and shipping companies were not allowed to transport oil above the price cap. Revenue for the Kremlin fell by 23 percent to $114 billion. But the effect faded over the course of the year: “Many buyers in non-OECD countries are not subject to the price limit as long as they do not use Western ships or insurance,” explains Kevin Schäfer. “The price limit is therefore increasingly irrelevant or can be circumvented without violating applicable law.”

To do this, Russia bought and chartered old oil tankers and used them to form the so-called shadow fleet. These camouflaged ships are intended to circumvent the sanctions. Instead of being shipped to Europe, the oil is now being shipped to India and China: the two most populous countries in the world can put the raw material to good use – and demand hefty discounts. Nevertheless, Russia’s revenues stabilized in 2024: the Kremlin’s oil and gas profits grew by 25 percent to $143 billion. Almost as much as in the record year 2022.

Until US President Donald Trump turned the tide: In October 2025, he decided to impose sanctions against the Russian oil giants Rosneft and Lukoil. The price of Russian crude oil then decoupled from the global market and plummeted again to the junk level of $40 at the beginning of December. This was last achieved at the beginning of 2023, when Europe’s import ban came into force. For 2025, IW economist Gerards Iglesias only expects oil and gas revenues of $112 billion for Russia.

Putin increases taxes

Russian military spending has multiplied since the start of the war. Not the oil revenue: “In 2021, the Russian state still generated surpluses. Since the start of the war, the state has had to take on new debts, especially domestically, because the international capital markets are closed to Russia,” explains Simon Gerards Iglesias.

In 2015, the Kremlin was still able to pay for half of its budget with oil and gas revenues. According to Gerards Iglesias, by 2026 it will only be a quarter. “Russia has largely exhausted the possibilities of evading sanctions. That is why the state must find new sources of money for the war.” In addition to debt, that means tax increases. “In 2026, VAT rose by two percentage points to 22 percent. The tax on corporate profits and income tax also rose,” said the IW economist. “Inflation is between eight and nine percent. A VAT increase is not popular, even in an authoritarian system.” He doesn’t believe that Putin could step up his efforts at the moment: “If Russia now wants to put more money into the military, it will either have to shift its budget further towards defense, take on new debts with domestic banks or increase taxes even further. But that will soon reach its limits. Russia is a huge country in which schools and social systems as well as the civilian economy also have to function.”