IEEJ：May ©IEEJ 2022
Special Bulletin
A Japanese Perspective on the International Energy Landscape (585)

May 20, 2022

The Influence and Significance of Russia, a Giant of Fossil Fuel Export
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanThe Ukraine crisis turned around on Russia’s military invasion on February 24 and has
continued to rattle international politics, security, geopolitics and the global economy over the past
three months. It has also continued to shake international energy markets. International energy prices
shot up from levels before the crisis and have remained high. Given that future Ukraine crisis
developments are uncertain, energy market players are concerned that international energy markets
could be destabilized further.
Among various factors behind the potential further destabilization of international energy
markets, the most essential factor is that Russia has a great presence in international energy markets,
leading the important Russian energy supply itself to become a risk. In the following, I would like tosummarize and reaffirm Russia’s significance for international energy markets to provide references
for considering the future international energy situation regarding Russia.
Russia is significant for international energy markets because it is a significant energy
supplier for the world. According to BP statistics, proven oil reserves in Russia stood at 107.8 billion
barrels at the end of 2020, accounting for 6% of the global total. Russia ranks sixth in oil reserves in
the world, following Venezuela, Saudi Arabia and three others. Natural gas reserves in Russia thentotaled 37.4 trillion cubic meters, the largest in the world, commanding 20% of the global total. Backed
by the rich reserves, Russia produced 10.67 million barrels per day or 12% of the global total oil output
in 2020, ranking third after the United States and Saudi Arabia. It also produced 638.5 billion m3 innatural gas, accounting for 17% of the global total. Russia ranked as the second largest gas producer
in the world, following the United States.
The significance of Russia as an energy exporter is more remarkable. In 2020, Russia
exported 7.43 million bpd in oil, or 11% of the global total, ranking as the third largest oil exporter
after Saudi Arabia and the United States. On a net export basis, Russia was the second largest exporter
after Saudi Arabia. The United States not only exports large volume of oil but also imports similarly
large volume of oil. In the year, Russia was the largest natural gas exporter, accounting for 238.1
billion m3 or 25% of the global total, leaving Qatar as the second largest exporter far behind. It also
accounted for 18% of global coal exports on a calorie basis, ranking as the third largest coal exporterin the world following Australia and Indonesia. Russia is thus a giant fossil fuel exporter. On a calorie
basis, it is the world’s largest fossil fuel exporter.
In the nuclear energy field as well, Russia has attracted global attention in recent years.
Russia accounts for 8% of global nuclear power generation, ranking as the world’s third largest nuclear
power generator after the United States and France. In particular, state-run nuclear energy company
Rosatom has attracted attention with its aggressive overseas expansion (undertaking overseas nuclear
power generation projects), boosting Russia’s presence in the international nuclear energy market.
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Regarding fossil fuels again, Russian energy exports’ presence is conspicuously higher inEurope than in the world. In 2020, Russia accounted for 33% of oil imports into the European market(including Turkey), 57% of natural gas (pipeline gas and LNG) imports and 50% of coal imports.
Russia is the largest exporter of each fossil fuel to the European market.
Factors behind such large Russian shares of energy exports to Europe include not only
geographical proximity and pipeline connection but also Russian energy supply’s excellent
competitiveness which has made Russian energy supplies economically attractive for Europe.
Meanwhile, the European market is extremely significant for Russia, absorbing 53% of Russian oilexports, 78% of Russian natural gas exports and 35% of Russian coal exports. Clearly, Europe’s sharesof Russian exports are particularly high for oil and natural gas. Russia and Europe heavily depend oneach other through Russian energy supply.
Russia might have developed and implemented its energy strategy based on its
understanding and recognition of the strategic significance of its energy supply to the world including
Europe. As the energy sector represents the Russian economy’s bread and butter, it is natural for Russia
to have a strategic intention to take advantage of the energy sector and exports for maximizing Russian
national interests. For such strategic purpose, powerful state-run companies or corporations with close
relations with the Putin government exist and flourish. They include Gazprom, Rosneft, Novatek andRosatom.
In 2000 when Vladimir Putin assumed his first presidency, crude oil prices launched anuptrend in the international market. As crude oil prices retained the uptrend in the 2000s, Russiancrude oil production entered an expansion phase. The crude oil price hikes and production expansion
brought about a massive oil revenue increase for Russia, supporting the recovery and development of
the Russian economy. As Putin led Russia’s recovery from the 1990s known as its lost decade, hemight have felt the strategic significance of the energy sector. While Russia expanded its presence in
the international oil market again through the oil production increase, an energy strategy linked closely
to Russia’s national will was implemented to exert great influence on the world.
In fact, Russia has demonstrated its presence in recent international energy markets with its
strategic actions as well as its export volume and shares. Russia is now a central player in the OPECplus group of oil-producing countries in oil supply and demand adjustments. When oil prices
weakened due to a sharp increase in U.S. shale oil production and the COVID-19 pandemic, Russia
cooperated with the Organization of the Petroleum Exporting Countries in arranging a coordinatedproduction cut, playing a key role in rebalancing oil supply and demand to achieve an oil price recovery.
This is because OPEC leader Saudi Arabia has emphasized its cooperation with Russia in cutting oil
production and remained cautious of increasing oil production as requested by oil-consuming
countries even amid the Ukraine crisis. Such Saudi attitude also reflects its soured relations with theUnited States. In the natural gas market, Russia suppressed its pipeline gas supply to Europe plagued
with LNG oversupply under the COVID-19 pandemic in 2020, indicating a strategic action to avoid
further deterioration of the supply-demand balance and natural gas price falls.
The Ukraine crisis has led the world to recognize Russia’s great presence in internationalenergy markets. However, the significant presence in markets has become a significant risk factor forthe stability of international energy markets including Europe. In the face of the significant risk, therest of the world including Europe has begun to implement strategies to phase out dependence onRussia. Europe is about to phase out dependence on Russia with powerful initiatives that would havebeen inconceivable without the Ukraine crisis. Russia’s significance as supplier in international energy
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markets may not decline substantially or immediately. However, the Ukraine crisis has dramaticallytransformed the international situation regarding Russia. From the medium to long-term perspective,
we will have to watch the future of Russia as a giant fossil fuel exporter.

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