- Russia may deploy its navy to protect its shadow fleet transporting sanctioned oil.
- The West has increased sanctions on Russia’s oil industry and is zooming in on its shadow fleet.
- Russia’s economy faces challenges like inflation, a weak ruble, and high interest rates.
Russia may ratchet up “risky and threatening behavior” against NATO countries, including by using the Russian navy to escort its shadow fleet through Danish waters, Denmark said on Wednesday.
The Danish Defense Intelligence Service made the assessment in its annual security outlook published on Wednesday.
“If this happens, it will increase the level of tension,” said the Danish intelligence agency.
Denmark’s assessment came as the West turns up sanctions against Russia’s important oil industry, a key contributor to its war chest.
On Monday, the European Union sanctioned more Russian dark fleet vessels — designated as such because they dodge the G7’s oil price cap by either submitting falsified financial statements or not having proper insurance coverage. A day later, the UK also broadened its sanctions against these vessels.
On Tuesday, a dozen Western countries, including Denmark, the UK, Germany, Finland, and Estonia, agreed to step up checks on the insurance coverage of suspected shadow tankers transporting Russian oil.
Russia’s shadow fleet of mostly aging oil tankers grew after the G7 imposed an oil price cap on Russian oil in December 2022. The shadow fleet has helped Russia circumvent Western restrictions and allowed it to continue trading its oil at market prices, according to the EU.
Energy accounts for about one-fifth of Russia’s GDP. The country’s oil revenue fell 24% last year on the back of sanctions.
Oil revenues continue to be under pressure this year. Russia exported an average of 70,000 barrels of crude a day so far — 2% lower than the 2023 average, Bloomberg reported.
Russian economy under strain
The West’s increasing pressure on Russia’s energy trade is aimed at further straining the country’s finances after nearly three years of war.
While Russia’s economy has helped build strong financial buffers in the past years as war raged on, the economy faces “increasingly large unsustainable burdens,” wrote Mark Sobel, the US chair of the Official Monetary and Financial Institutions Forum, a think tank, this week.
The energy giant’s lucrative oil industry is also under pressure from global energy market dynamics, including an abundance of supply and slowing demand.
Russia faces numerous economic challenges, including soaring inflation, the plummeting ruble, record-high interest rates of 21%, and capital controls.
“Even if sanctions and blocked Russian assets are not going to bring Russia’s economy to its knees in one fell swoop, they remain powerful leverage and can be used more forcefully in any agreement to end the fighting and secure Ukraine’s future,” wrote Sobel.
