International Energy Agency (IEA) Executive Director Fatih Birol believes Russia will lose its energy war with the West, saying China and India’s crude oil purchases will likely fall short of offsetting the fall in shipments to Europe.
“Europe is having major economic problems, but for Russia, Europe was a very, very important client,” Birol told CNBC’s Joumanna Bercetche at the World Economic Forum in Davos, Switzerland.
Last week, an independent analysis from the Center for Research on Energy and Clean Air showed that revenues from Russia’s fossil fuel exports collapsed in December, significantly hampering President Vladimir Putin’s ability to finance the war in Ukraine.
The Finnish think tank’s report found that 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 ($173.4 million) per day.
It said that the Western measures were largely responsible for a 17% fall in Russia’s earnings from fossil fuel exports in the final month of 2022. A spokesperson for Russia’s Finance Ministry did not respond when asked to comment on the report’s findings.
Birol described Russia as “the number one energy exporter to the world” prior to Moscow’s full-scale invasion of Ukraine on Feb. 24 last year.
Roughly 75% of Russian gas exports and 55% of its oil exports went to Europe, Birol said, before the EU sought to rapidly wean itself off Moscow’s fossil fuels.
“So, to find a client for gas and oil so easily to replace Europe will be extremely difficult,” he said. “I know that there are some countries in Asia, [such as] China and India, that are benefitting from this situation, and they are buying a lot of Russian oil, but I would be very careful to believe that those countries’ imports will, both in volume terms and revenue terms, combine to what Europe was doing.”
“Russia will face major difficulties both for oil and gas exports and, in my view, when we look at the next couple of quarters and years, Russia will lose the energy battle,” Birol said.