Page 7 - FSUOGM Week 13 2022

FSUOGM COMMENTARY FSUOGM

their contracts, or stop payments altogether. This Analysts are also concerned that European
may well prompt Gazprom to cut off supply, even customers might struggle to raise the $40bn
though this would hurt Russia’s revenue flow sig- equivalent in rubles to cover their gas bills in a
nificantly. After all, in 2021 pipeline natural gas year, assuming they do agree to follow the new
accounted for $54.2bn of its exports, or 11% of requirement. The market took Putin’s proposal
the total. as a way of supporting the ruble, but economists
European economies would be hit harder, doubt whether the change will affect the makeup
however, as the continent would have to resort of Russia’s current account. Essentially, it makes
to any other sources of energy available to no difference if Gazprom receives dollars and
reduce the risk of rolling blackouts and elec- then sells them on the Moscow exchange, if its
tricity shortages in the 2022-2023 winter, if foreign buyers buy dollars on that exchange in
not sooner. order to pay Gazprom in rubles. The amount of
However, another question is whether Putin’s dollars flowing into the central bank will remain
long-held goal to introduce the ruble to Russia’s the same.
international trade is really wise. By doing so, Another motive may be to force Gazprom to
Russia would cut itself off from one of its biggest convert 100% of its foreign exchange earnings to
sources of hard foreign currency, at a time when rubles, but it would be far simpler for the central
the central bank and other Russian lenders are bank to lift the bar from 80% to 100% for forced
scrambling to pay their foreign debts after having currency exchanges if that was the case.
had their US dollars and euro accounts frozen. At the same time, the move could bring about
Elina Ribakova, deputy chief economist at serious risks for Gazprom. Given the contractual
the Institute of International Finance, notes that violation involved, the terms of contracts could
if Gazprom now has to collect all its payments in all become up for renegotiation, including their
rubles from European clients, then the current terms and designated volumes. European buyers
80% of foreign currency surrender requirement could cite Gazprom’s breaches as justification for
imposed by the central bank effectively becomes cutting off deals with Gazprom sooner than pre-
100%. viously agreed. ™

PIPELINES & TRANSPORT

Transneft curtails oil intake to system

amid storage limits

RUSSIA RUSSIAN oil pipeline operator Transneft has because of weak refining runs at home.
started restricting oil intake into its system as Russia is known to have comparatively little
Russian exporters are storage levels have built to a brimming point, oil storage capacity compared with other top-
struggling to find buyers Reuters reported on March 29 citing sources. three oil producers US and Saudi Arabia. Some
for their oil. The news agency said that Transneft had oil can be stored at fields, refineries and within
informed several Russian oil firms that it was Transneft’s network. Transneft does not divulge
limiting the supply volume it could receive from details about how large its storage network is,
them because of high volumes of oil in storage. however. ™
Russian crude suppliers have faced unprece-
dented difficulty exporting their product since
Moscow’s invasion of Ukraine began, owing to
difficulties caused by sanctions, even though
sanctions do not directly affect energy trade.
Traders are also shunning Russian oil because of
its association with Putin’s regime.
The curbs in intake mostly relate to oil that is
yet to find a buyer, according to Teuters, while
companies that are having no difficulty selling
cargoes are similarly having no difficulty using
Transneft’s system, source said.
The news agency estimates that over a dozen
cargoes of Urals oil from the March loading plan
were cancelled, postponed or replaced because
of weak demand, and Russian producers are
also having to divert extra volumes for export

Week 13 30•March•2022 www. NEWSBASE .com P7