Page 4 - EurOil Week 18 2022

EurOil COMMENTARY EurOil

The likely impact of EU sanctions

on Russian oil imports

Although Russian oil companies appear to have shifted some deliveries to Asia,

Moscow is already well-versed in embargo evasion – and Brussels has some

incentives to look the other way

GLOBAL AT the time of writing, the energy ministers Russia’s new workarounds
of the European Union’s 27 member states are It is not just the EU that will be working around
WHAT: debating the question of whether to impose an obstacles, though. Russia will be doing the same
The EU is mulling embargo on the importation of Russian crude oil thing, along with global oil trading networks.
proposals for introducing supplies. They have yet to make a final decision There are plenty of signs that Russia is already
a formal embargo on on the ban, which would be part of the sixth set seeking out alternative avenues for the sale of its
Russian oil imports. of sanctions imposed on Russia since the inva- crude. Ami Daniel, CEO of Israel’s Windward
sion of Ukraine in late February. consultancy, told CNN in late March that the
WHY: The issue is a contentious one, not least amount of so-called “dark activity” among Rus-
US sanctions on because Russia is one of the EU’s most impor- sian tankers – that is, incidents that involve ships
Venezuela gave Russia an tant sources of oil. It is also not an abstract switching their transponders off for hours at a
opportunity to practise matter. Multiple EU member states host the time – had risen by 600% since the invasion of
techniques designed to pipelines and marine terminals that deliver Rus- Ukraine.
obscure the origin of oil sian crude to European refineries. As a result, if Meanwhile, Dow Jones Newswires quoted oil
cargoes. Brussels bars Russian oil imports, there is a very traders as saying last month that Russian pro-
real risk that EU countries will start to experi- duction was a key component of certain new
WHAT NEXT: ence fuel shortages, along with all the price rises, grades of crude that have begun showing up on
Those techniques already privations and social disruptions that are likely the market this spring. Sellers are offering these
appear to be in play to accompany them. new grades – which sport names that reference
in the Mediterranean It is no wonder, then, that Germany was slow former Soviet republics, such as “Latvian Blend”
and may become more to decide whether it would veto the proposed and “Turkmenistani Blend” – with the unspo-
common if Brussels EU oil embargo. The EU’s largest economy ken understanding that they consist partly of
introduces formal remains heavily reliant on Russian fuels, espe- Russian crude.
sanctions. cially natural gas (as it is the endpoint of sev- Dow Jones Newswires also reported, cit-
eral major Russian gas export pipelines), so of ing data from TankerTrackers.com, Kpler and The European
course it has only pledged to drop Russian oil other marine tracking services, that the volume
supplies after ensuring that it had extra time to of crude oil leaving Russian ports on tankers Commission
find other suppliers. “for orders” (that is, without any specified des- might grant
Nor is it a surprise that Hungary and Slovakia tination) had risen to 1.6mn barrels per day
are both adamant about vetoing the new sanc- (bpd) since the beginning of April. This is, for Hungary and
tions. Both of these countries host sections of the record, equivalent to nearly one third of the
the Druzhba pipeline network, and both have total volume of oil that Russia exported last year Slovakia extended
pointed out repeatedly that they do not have – 4.7mn bpd, according to data from the Inter-
any easy way to replace the energy they would national Energy Agency (IEA). waivers from an
lose if they dropped Russian oil companies as oil embargo or
suppliers. Shifting exports to Asia
But there may be a way around the veto. On Of course, there are a couple of points worth not- give them extra
May 2, two unnamed EU officials told Reuters ing here. First, the developments mentioned by
that Brussels was mulling the possibility of Windward, TankerTrackers.com et al. occurred time to replace
striking a deal with Budapest and Bratislava at a time when the EU had not placed any formal
in order to prevent an impasse over sanctions. restrictions on Russian oil imports and when Russian supplies.
Specifically, one of the officials said, the Euro- European oil traders were only self-sanctioning
pean Commission might grant Hungary and in the hope of not being seen as a source of sup-
Slovakia extended waivers from an oil embargo port for the invasion of Ukraine. (In other words,
or give them extra time to replace Russian the evasive manoeuvres were not always techni-
supplies. cally necessary.)

P4 www. NEWSBASE .com Week 18 04•May•2022