Russian revenue from the hydrocarbon sector is doing well overall, Reuters reported, despite the ever-encroaching sanctions packages imposed by the European Union and the G7, with estimates published by Reuters showing a rise to $9.4 billion.

The export of oil and gas, described as “the most important single source of cash for the Kremlin,” covers around half of the total Russian budget needs over the last ten years, the news service wrote.

And far from destroying that source of income with sanctions, the West has allowed it to flourish. Oil exports were diverted away from Europe to India and China and sanctions on selling oil for above $60 a barrel were not properly imposed.

Russia's June oil and gas revenue is projected to reach the level of 814 billion rubles ($9.4 billion), up from 794 billion rubles in May and 529 billion rubles in June 2023.

The news agency report says the country has increased defense and security spending since launching its attack on Ukraine in 2022, putting its budget into deficit for the past two years. The deficit has been financed with internal borrowing and by drawing on its National Wealth Fund (NWF), a fund in which a portion of oil and gas income is saved for export revenue for future welfare.

The Kremlin’s higher oil revenues more than makeup for lower receipts from exports of gas. Russian giant Gazprom made its first loss in 30 years in 2023 after Europe pulled the plug on most of its pipeline supplies.

But a report by the Brookings Institute calls for sanctions on oil shipping to be better policed, to cut off Russia's sales of oil at rates above the cap of $60 per barrel imposed by the G7, and therefore cut inflows to Vladimir Putin’s war chest.

Some 120 ships from the Soviet commercial fleet, Sovcomflot, are estimated to be carrying Russian oil abroad, often on old, leaky, underinsured vessels. The Brookings report says 14 of these ships have been identified as breaking sanctions and are no longer making deliveries.

Over 100 more Sovcomflot vessels could also be taken out of this trade, say the Brookings analysts, without impacting world pricing.

The reason pricing would not be affected is that if Russian tankers were banned from shipping the oil, then the exporters would have to transport their loads via international shipping lines. If that were the case, the price cap would be imposed limiting Russian income to $60 a barrel, as opposed to the current rate of over $80.