Page 24 - RusRPTJul22

Getting around the embargo will be difficult since Russia’s oil flow will be subject to increased scrutiny. But there are loopholes.
For example, Russia can use intermediaries to mask the country of origin of crude oil and petroleum products by mixing them with oil from other countries and giving the mixture a new name. This is an expensive process, since traders demand high discounts for the risks they're taking by circumventing sanctions.
But even giants like Shell have resorted to this method. It came out in April that the company had mixed 49% Russian diesel fuel with 51% non-Russian diesel fuel and categorized the mixture as a non-Russian product. This practice does not violate EU rules on the origin of diesel fuel and other oil products.
Another sign that suppliers are seeking to dodge sanctions is the huge increase in tankers carrying Russian oil that have turned off their tracking devices in recent months.
Monitoring potential embargo evasions won’t be easy. For example, oil from Kazakh deposits being exported from the Novorossiysk Port could easily be mixed with Russian oil.
Europe will suffer due to the embargo. Russian oil makes up almost 40% of Europe’s total oil imports. Europeans will pay for the embargo with a spike in inflation and an increase in energy poverty — that’s the price of helping Ukraine.
In annual terms, price growth has already reached 8.1%, a record high from the EU, while lagging countries will now be forced to compete with wealthier ones for oil, as well as for gasoline and diesel fuel. According to a prediction from the International Energy Agency, by the middle of the summer, the European motor fuel market may experience a shortage and spike a crisis that surpasses that of the 1970s in scale.
Freedom from dependence on Russian export oil will be a long and costly process for both the EU and the entire world. Transitioning to the more expensive Brent oil will cost the EU at least $2bn per month.
The EU also intends to curtail its dependence on Russian gas, but it’s unable to give it up as quickly as oil.
Gas from Russia is critically important for the region: in 2021, EU countries purchased 115bn cubic meters of it, making it 45% of Europe’s total imported gas and about 40% of its gas consumption. Nonetheless, experts from the International Energy Agency have already developed a plan to reduce Europe’s Russian gas imports to one third of what they are now, to 55bn cubic meters per year.
In addition, on May 31, Russia stopped supplying gas to the Dutch energy company GasTerra after it refused to pay in rubles, rather than in euros, as Russia demanded. The company belongs to the Dutch government, so the
24 RUSSIA Country Report October 2020 www.intellinews.com