Page 5 - EurOil Week 18 2022

EurOil COMMENTARY EurOil

Second, there is no indication that Russia sanctions regime might also be difficult.
has been using these workarounds purely What is more, Russia already has plenty of
as a means of moving petroleum into the practice with respect to finding ways to work
European market. In several cases, Suezmax around the limitations imposed by embargoes.
and Aframax-size tankers that departed the For example, state-owned Rosneft spent enough
Baltic Sea or the Black Sea with Russian oil time helping Venezuela’s national oil company
“for orders” in April have ended up transfer- (NOC) PdVSA to find creative new ways to
ring their cargoes to very large crude carriers export crude to China and other markets in
(VLCCs) that then sailed from the Mediterra- Asia despite that under US sanctions Washing-
nean to South Africa. ton actually blacklisted two of its subsidiaries,
Meanwhile, there is information to suggest Rosneft Trading SA and TNK Trading Interna-
that Russia is sending more oil to Asia from its tional, in February 2020.
Baltic and Black Sea ports than it did prior to Rosneft has also used some of the same tricks
the outbreak of war (and in some cases, using noted lately in the Mediterranean – according
smaller tankers than market conditions usu- to a Bloomberg report from November 2019,
ally warrant for such long-haul voyages). For which noted that a tanker chartered by the Rus-
example, the Suez Canal Authority (SCA) sian company had switched off its transponder
released data earlier this week showing that the upon entering Venezuelan territorial waters in
overall number of ships passing through the order to obscure its activities. (Russia also seems
canal had risen year on year in May – and this to be very familiar with the practice of blending
makes sense, given that in April 2021, the canal and relabelling crude exports in order to obfus-
operator was still coping with the backups and cate their origin, as Venezuela has been doing in
blockages caused by the MV Ever Given inci- Asia for several years.)
dent. But the increase in traffic didn’t affect all
marine operators equally. SCA data show that Sanctions: not 100% effective
while overall traffic went up by 6.3% year on It seems likely, then, that Russia will use these
year in April, tanker traffic alone went up by the tried-and-tested techniques (when it can get
disproportionate amount of 25.8% y/y. It’s not away with it) to keep at least some of its crude
at all clear how much of that traffic consisted of oil moving into Europe. It already knows how to The EU will also
Russian crude shipments to Asia, as the SCA do so, and it has an incentive to keep serving its
doesn’t provide full breakdowns of the numbers European customers (and avoid the headache of have incentives
it makes public. But in all likelihood, Russian oil an abrupt shift to Asia) if it can. not to work too
cargoes did account for some of the upswing. At the same time, the EU will also have incen-
tives not to work too hard to enforce sanctions, hard to enforce
Keeping Europe’s door open assuming that it does adopt them. It will be
Even so, assuming that the EU does introduce motivated by the desire to assuage the concerns sanctions,
sanctions, Russia is not likely to shift every last of member states that lack easy alternatives to
drop of the oil it has been exporting to Europe Russian oil supplies – including those such as assuming that it
by sea to Asia (and, to a lesser extent, Africa) in Hungary and Slovakia, which may be granted does adopt them.
the short term. exemptions from the ban. It will also be moti-
Making a shift in direction of this magnitude vated by the desire to stave off the social and
would present extraordinary challenges for economic disruption that might follow energy
all of the parties involved. Finding the tankers shortages. And in the end, it might also be moti-
needed to move the oil would be difficult. Find- vated simply by the lack of political will to take
ing the credit needed to finance the deals (and the kind of action needed to chase down every
the banks to handle the transactions, especially European company with direct or indirect ties
now that Russian access to capital markets has to Russia’s oil sector.
been restricted) would be difficult too. Finding In any event, even with sanctions, the EU will
the incentives needed to convince potential buy- continue to import some Russian crude – less
ers to ignore pressure from the West to join the than it has been doing, but some.™

Week 18 04•May•2022 www. NEWSBASE .com P5