European countries have been scrambling to find alternative sources of oil and gas following Russia’s full-scale invasion of Ukraine in Feb. 2021.

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Russia’s revenue from fossil fuel exports collapsed in December, according to a new report, significantly hampering President Vladimir Putin‘s ability to finance the war in Ukraine.

The findings, Ukrainian officials and campaigners say, illustrate the effectiveness of targeting Russia’s oil revenue and underscore the urgent need for Western policymakers to ratchet up the financial pressure on Moscow in order to help Kyiv prevail.

Published Wednesday by the Centre for Research on Energy and Clean Air, an independent Finnish think tank, the report found the first month of the European Union’s ban on seaborne imports of Russian crude and the G-7’s price cap had cost Moscow an estimated 160 million euros ($171.8 million) per day.

CREA’s report said the Western measures were largely responsible for a 17% fall in Russia’s earnings from fossil fuel exports in the final month of 2022. It means that Russia — one of the world’s top oil producers and exporters — saw revenue from fossil fuel exports slump to its lowest level since Putin launched his full-scale invasion of Ukraine in late February.

“The EU’s oil ban and the oil price cap have finally kicked in and the impact is as significant as expected,” Lauri Myllyvirta, lead analyst at CREA, said in a statement.

“This shows that we have the tools to help Ukraine prevail against Russia’s aggression. It’s essential to lower the price cap to a level that denies taxable oil profits to the Kremlin, and to restrict the remaining oil and gas imports from Russia,” Myllyvirta said.

The Group of Seven, Australia and the EU implemented a $60-per-barrel price cap on Russian oil on Dec. 5. It came alongside a move by the EU and U.K. to impose a ban on the seaborne import of Russian crude oil.

Russian President Vladimir Putin attends a meeting at the Kremlin in Moscow on January 6, 2022.

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Together, the measures reflected by far the most significant step to curtail the fossil fuel export revenue that is funding the Kremlin’s onslaught in Ukraine.

Energy analysts had been skeptical about the impact of a price cap on Russian oil, particularly as Moscow had been able to reroute much of its European seaborne shipments to the likes of China, India and Turkey.

Russia retaliated against the Western measures late last month by banning oil sales to countries that abide by the price cap.

Kremlin spokesperson Dmitry Peskov has previously said a Western price cap on Russian oil would not impact its ability to sustain what it describes as its “special military operation” in Ukraine. Peskov also warned the measure would destabilize global energy markets, Reuters reported.

A spokesperson for Russia’s Finance Ministry was not immediately available to comment on the report’s findings.

‘Financial bloodline for Putin’s war’

Oleg Ustenko, economic advisor to Ukrainian President Volodymyr Zelenskyy, said Wednesday that while it is “very good news” that Russia is losing revenue from fossil fuel exports as a result of the Western measures, they were “definitely not enough.”

Ustenko echoed Zelenskyy’s calls for a price cap that is set at a much lower level, saying at a briefing that each escalation of economic sanctions against the Kremlin should see the oil price cap come down to a target range of $20 to $30 a barrel.

There is “no reason to wait and see,” Ustenko said. “It is already clear.”

“The EU and G7 have the power and all means to cut this bloodline. Only force and money speak to the Kremlin.”

Svitlana Romanko

Founder and director of Razom We Stand

CREA’s report found that the measures caused a fall in shipment volumes and prices for Russian oil that has cut the country’s export revenue by 180 million euros per day.

By increasing exports of refined oil products to the EU and the rest of the world, the report said Moscow had been able to claw back 20 million euros per day, resulting in a net daily loss of 160 million euros since the Western measures came into force.

Russia still makes an estimated 640 million euros per day from exporting fossil fuels, the report said.

“The first month of the embargo proves what we’ve been saying from the beginning of the invasion: income from exports of fossil fuels is the financial bloodline for Putin’s war,” said Svitlana Romanko, founder and director of Ukrainian human rights group Razom We Stand (Together We Stand).

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“The EU and G7 have the power and all means to cut this bloodline,” she added. “Only force and money speak to the Kremlin.”

Romanko called on the price cap coalition to lower the limit, strengthen the enforcement of the embargo and introduce additional sanctions to close loopholes.

CREA’s report says lowering the oil price cap against Russia to between $25 and $30 a barrel, a range it notes is still “well above” production and transport costs, would slash Russia’s oil export revenue by at least 100 million euros per day.

It says that the Western price cap coalition boasts “strong leverage” to push down the price caps, adding that “Russia has not found a meaningful alternative to vessels owned and/or insured in the G7 for the transportation of Russian crude and oil products from Baltic and Black Sea ports.”