Cut Russian oil revenues instead of restricting exports, top energy trader Pierre Andurand says

• The founder of Andurand Capital Management discussed the best way to sanction Russian energy in an FT opinion piece.
• Pierre Andurand said the aim must be cutting Russian energy export revenues while minimizing market impact.

Energy trader and founder of Andurand Capital Management Pierre Andurand said reducing Russia's energy export revenues, rather than flows of oil and gas to the market, would be the best way to impose sanctions.

In an opinion piece for the Financial Times on Tuesday, Andurand said: "The ideal goal would be to lower Russian revenues while minimizing the impact on oil flows."

Andurand, who famously called oil's rise to a record $147 a barrel and its subsequent crash in 2008, laid out two ways to achieve this as the West considers how to punish Russia via its energy exports. Europe in particular is heavily reliant upon Russia for both its oil and gas.

The European Union could impose price caps on Russian oil, Andurand said. These caps should be low enough to restrict Russian military spending, but high enough to still incentivize Russia to sell to the European market. He proposed a limit of $50 a barrel on Russian oil and added that a high EU tax would serve the same purpose.

His second suggestion would be to pay that $50 a barrel to the Russian energy companies and any surplus to be held in escrow accounts that would then only be repayable after factoring in Ukraine's reconstruction costs and once Russia had rebuilt the trust of the international community, he said.

"Russia could refuse and decide to cut all energy exports to Europe. As a result, though, it would receive no money from Europe and lose all pricing power due to the lack of competition for its exports. This scenario would not be ideal for either party," Andurand wrote in the FT.

"In any scenario, it would be prudent for Europe to put its economy in war mode to accelerate its energy transition, boost its defence industry, become more self-reliant and work closely with North America for its energy security," he said.

Andurand said he'd also considered the impact of sanctions and a ban on Russian oil into Europe. He said that would result in Russia struggling to find buyers for 2-2.5 million barrels of oil per day, and this would weigh heavily on the global oil market.

He said replacing the loss of 2.5% of the world's oil supply — roughly equivalent to Russia's 2.5 million barrels per day — would be difficult, but not impossible.

"The visibility of such a supply loss would encourage other producers with spare capacity to utilize it straight away and US producers to increase production significantly," he said.

"The Russian regime with its Stalinist playbook has to be stopped, or at a minimum contained," he said.