Page 5 - AsianOil Week 33 2022

AsianOil COMMENTARY AsianOil

that currently serve the European market. But a expanding relationship with Pakistan, would
gas deal for these supplies is not yet in place, and make India’s increasing energy reliance on Rus-
Henderson doubts that deliveries could begin sia difficult to sustain.”
before 2027 at the earliest, with 2030 a more With the EU committing to end its reliance
likely start date. on Russian energy by 2027, and the bloc acceler-
Russia also has aspirations to rapidly expand ating its energy transition, it is clear that Russia’s
its LNG export capacity prior to the invasion of dominance as an energy supplier to the con-
Ukraine, but with Western financiers, contrac- tinent will wane, even if some of Brussels’ tar-
tors and suppliers largely barred from partic- gets prove overly ambitious. Russia has already
ipating in these projects, there are significant helped realise EU’s goals through its own actions,
obstacles. having substantially reduced its gas exports to
If Russian gas exports to Europe drop to 50 the bloc in recent years, forcing countries to push
bcm per year in the next couple of years, Russia on with LNG import projects as fast as possible,
will be unable to replace volumes with additional and irrevocably tarnishing Russia’s reputation
Asian sales, Henderson notes. But Russia might as a reliable supplier. Just a year ago, Moscow
be able to achieve a rebalancing of its export was touting its potential to become a major blue
flows by the early 2030s, if it can deliver on its hydrogen exporter to Europe, securing it a place
project pipeline. in the energy transition even as demand for
“China’s oil demand is forecast to peak in hydrocarbons starts to recede over the coming
2027, and its commitment to net-zero emissions decades. That aspiration is now truly dead.
by 2060 could well diminish the need for Russian “Furthermore, without access to foreign
gas supply,” Shagina says. technology and capital, it will be a tall order
for Russia to launch its own green transforma-
India has also been expanding Russian oil tion,” Shagina writes. “Russia’s best chance to
purchases in recent months, taking advantage of achieve lies, again, with China. Given Beijing’s
their discounted prices as a result of sanctions. slow phase-out of gas, its decarbonisation plan
Over the past few months Russia has emerged is compatible with Moscow’s own resistance to
as India’s biggest oil supplier, expanding its an aggressively green agenda. China might also
share of the country’s import mix from only be the only source available to Russia of clean
1.3% to 25%. But Shagina notes that any further investments and green technology in exchange
increase would run into technical and logistical for Russian hydrogen.
challenges. “This,” she continues, “leaves Russia at China’s
“Rerouting Russian oil to India would have mercy. Moscow will become ever more reliant
to be done via sea routes,” she writes. “This will on Beijing, intensifying the imbalance in their
be harder after the EU and UK’s insurance bans already strongly asymmetrical relationship. Bei-
become effective, as European and British insur- jing is likely to capitalise on Moscow’s isolation,
ance companies control over 90% of the insur- much as it did after sanctions were imposed over
ance market for oil tankers.” its illegal annexation of Crimea in 2014, dictat-
Western allies are looking to impose a global ing the conditions on energy deals and extract-
price cap on Russian oil, by threatening to deny ing maximum benefits while avoiding exposure
importers access to insurance for tankers unless to sanctions.
they agree to pay no more than a certain price. “Russia, for its part, has little leeway for hedg-
“This would mean that Indian buyers would ing given the breadth of the post-invasion sanc-
have to take more risks and rely on a less devel- tion coalitions, which include Asian countries
oped insurance market,” Shagina notes. “From such as Japan and South Korea,” Shagina con-
a political standpoint, China and Russia’s tight- cludes. “Russia’s days as an energy superpower
ening strategic partnership, and Moscow’s appear to be over.” ™

Week 33 22•August•2022 www. NEWSBASE .com P5