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Western countries imposed some sanctions on the Russian Federation and some Russian individuals since the start of the invasion of Ukraine. But Russia can still sell oil on the international markets and China and other non NATO countries will probably buy that oil.
Is it possible that due to the recent surge in oil prices the oil and gas revenues eventually compensate the losses due to the sanctions? Did the western countries take into account such possibility when they devised those sanctions?
Yes. That is why there are no comperehensive sanctions on oil and gas yet. To make this work, there would have to be sanctions on customers of Russian oil. According to Reuters:
Asked if the United States has ruled out banning Russian oil imports unilaterally, Blinken said: "I'm not going to rule out taking action one way or another, irrespective of what they do, but everything we've done, the approach starts with coordinating with allies and partners," Blinken said.
As far as I am aware, there are no sanctions on oil or gas yet.
Instead, the sanctions come in two flavours: one is the part where Russian banks are cut off from the international banking system and Russian overseas assets (read: money) are being frozen; the second is restrictions on the trade of certain goods. The former needs little explanation.
Importantly, both the import and export of certain goods into/out of a sanctioned territory may be sanctioned and the lists need not be identical. When choosing which goods cannot be imported into the sanctioned territory (from the sanctioning nations) the following aspects are considered:
Conversely, when considering exports from the sanctioned territory the considerations are almost opposite:
In the case of Russia, most of the nations doing the sanctioning (the US, Canada, Japan, South Korea, Australia, the EU, etc.) are highly developed nations while Russia itself is typically not classified as highly developed and instead still strongly relies on natural resources. Therefore, prime targets for goods that can no longer be exported out of Russia would be oil, gas and minerals. On the other hand, prime targets for import sanctions would be high tech, manufactured end-products and the like, which Russia is unlikely to be able to source elsewhere and cannot reasonably quickly source domestically.
This in turn means that reducing Russia's income by hitting its exports is only part of the puzzle. A much more significant portion is reducing Russia's ability to import other goods that it might need. For example, it is highly likely that Russian airlines will struggle to maintain their Airbus and Boeing jets as many of the necessary parts might be sanctioned (this was the case for Iran and led to an amusing issue when a long-distance flight experienced a technical issue and performed a safety landing in Iran: flying in the necessary parts to repair that aircraft might have run afoul of the sanctions. I do not remember how that story ended).
So of course, a small part of the sanctions (sanctioned exports, thereby lost income for Russia) will be offset by higher oil and gas prices meaning these hitherto unsanctioned goods will be more profitable; but there is far more to the big picture than just this minor issue (which may well have been priced in a priori).
I was initially optimistic on that but a recent article from The Guardian shows that Russia even DOUBLED their revenue from oil sales, regardless of all sanctions already in place. Less oil has been sold but for higher prices.
This is obviously unfortunate but we do not know how will this evolve in the long run.
When the fish gets smelly and many customers stop buying it, can the seller get the same revenue just by asking higher price for the now smelly fish? A free market specialist would probably say "unlikely."
When the oil smells of blood and customers stop buying it, what is the difference?
Russia provides about 10 % of the global oil supply. This is far from the position of the monopolist who could raise the price multiple times to "compensate" for something and everyone would pay. Source, source.
Russian oil is not particularly desired, because of existing and potential sanctions that may hinder the purchase, delivery or payment. Russia tries to force push it with huge discounts and still cannot always find a buyer. Tankers do not want to transport it, banks do not want to handle transactions for it, insurance providers do not want to insure business around it. Not forbidden but too much of the headache.
Oil prices have declined during recent years, at times even as low as getting negative (yes, "we pay money for you to take our oil we cannot stop producing swiftly enough", source). For some, bans for Russian oil are more solution than a problem, to prevent other oil industry from closing.
Really bad time to ask paying more for this oil.
