Page 7 - FSUOGM Week 08 2023

FSUOGM TIMELINE FSUOGM

August 10, 2022: First proposed in April, a of $45 for discounted products such as fuel oil
European Commission proposal to ban Rus- and naphtha. As was the case with the measure
sian coal imports came into force in August. targeting Russian crude oil, EU and G7-based
The four-month in-between period was de- companies are barred from providing transport
signed to give European countries time to look services for the sale of Russian petroleum prod-
for alternatives, whether that meant expanding ucts, or any technical assistance, brokering ser-
domestic production or securing alternative vices, financing or financial assistance for the
imports. delivery of those cargoes, unless the price caps
are complied with.
September 26, 2022: On this day, a series of Again, it will take time to weigh up the effec-
leaks were reported at the Nord Stream 1 and 2 tiveness of these new measures. For its part,
pipelines, rendering three of their four strings Russia responded in mid-February announcing
unusable. Russia accused the US and its allies of it would cut its oil production by 500,000 bpd
sabotaging the pipelines, and Western govern- from March – the equivalent of 5% of its national
ments, while stopping short of openly blaming output.
Moscow, issued a warning against any attacks “As of today, we are fully selling the entire
on critical energy infrastructure. volume of oil produced; however, as stated ear-
Investigations by authorities in Denmark lier, we will not sell oil to those who directly or
and Sweden have continued since then, and indirectly adhere to the principles of the ‘price
while there is broad consensus that the pipelines cap’,” Deputy Prime Minister Novak said in a
were sabotaged, there is no firm evidence of who statement at the time.
was behind the attacks. Further controversy
ensued when veteran US journalist Seymour What next?
Hersh alleged in an article in early February that The loss of market share in Europe led to Rus-
the US Navy, at the behest of US President Joe sian pipeline gas exports to countries outside
Biden, was responsible for blowing up the Nord the former Soviet Union dropping 45% to a
Stream 1 and 2. But his report, based on a single post-Soviet low of 100.9 bcm, despite increased
anonymous source, has been strongly denied by shipments to China. Supplies to Europe have
Washington. fallen further this year, and are now estimated
to be only 10-15% of the pre-war level. It will
December 5, 2022: take longer for the impact of embargos on Rus-
While initially the breakdown of the Russia-Eu- sian oil and petroleum products to be seen,
rope energy relationship was centred around however, given their only recent introduction.
gas, the EU on December 5 imposed an embar- In contrast, Russian LNG supply to Europe
go on most imports of Russian crude, to fur- has not only been unaffected by the fallout from
ther deprive Moscow of revenue. Along with the conflict in Ukraine, but even grew last year,
G7 members, it also imposed a price cap on with Russia emerging as the continent’s third
Russian oil sold in other markets. The measure biggest supplier after the US and Qatar. This has
works by prohibiting EU+G7 companies from led to some calls in Europe for these shipments
providing shipping, insurance, financing or any to also be restricted, as Germany’s government
other services to Russian oil cargoes sold above recently discussed, or be made subject to a price
a price cap of $60 per barrel. cap, as Estonia has called for.
The effectiveness of the sanctions is yet to Regardless of how events unfold in Ukraine
become clear. Russian oil production remained – whether a peace deal or at least ceasefire is
resilient after the December measures were reached this year – it seems highly unlikely that
introduced, as Russian producers were able to Russia will ever reclaim the energy market share
divert most of their exports to other markets, it once enjoyed in Europe. The country’s repu-
particularly in Asia. Also, there are some unan- tation as a reliable supplier has been irreparably
swered questions about whether buyers in Asia tarnished, and its market share is being seized
are truly adhering to the price cap. While Russia’s by competitors. However, there is scope for the
flagship Urals blend continues to trade below embargos to be partially eased over time, and
$60 per barrel according to free-on-board (FOB) Russian supply to be at least partially restored.
assessments at Russian ports like Primorsk, there This means that the fate of Russia’s energy
is a lack of transparency about what additional industry will ultimately rest in Asia. While Rus-
surcharges Russian exporters may be charging sian exporters have successfully diverted oil to
buyers that could mean the ultimate price is those markets, it will take considerably longer
above the cap. to build the necessary pipeline and LNG infra-
structure to achieve the same with gas. At the
February 5, 2023: The EU and G7 brought same time, Russia has been deprived of the West-
into force two more caps on different Russian ern financing, technical expertise and technol-
petroleum products based on their market ogy to develop that infrastructure. In the case of
value on February 5. A price cap of $100 per pipeline exports, the only realistic buyer of extra
barrel was introduced for premium products gas is China, putting Russia in a weak bargaining
such as diesel, kerosene and gasoline, and a cap position. ™

Week 08 22•February•2023 www. NEWSBASE .com P7