Who will buy Russian oil? How will the global market change after the new US sanctions

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, gave a detailed interview to the online portal Novye Izvestia about the impact of new US sanctions against major Russian oil companies on Russian oil exports.

— Everyone thought that India was the weak link in Russian oil exports. It turns out that it is not the only one. Great doubts have emerged about Russia's main foreign economic partner, China. What's happening?

— In fact, I am still confident that China will retain the opportunity to purchase Russian oil, including from sanctioned companies, since Rosneft and Lukoil account for more than half of Russia's oil exports. In fact, the restrictions imposed on them will apply to China to a lesser extent, because we have long been carrying out all mutual settlements with Chinese companies in national currencies, yuan and rubles. Therefore, American sanctions prohibiting settlements in dollars will not affect Russian oil exports to China. But there may be issues with India.

— It's not just about the currency used, but also about the stability of the global oil market.…

— The most important thing is that the sanctions imposed by the United States do not imply secondary sanctions for those companies that will interact in one form or another with sanctioned companies from Russia. It was emphasized by the American administration that secondary sanctions are not envisaged.

— And then what can buyers of Russian oil do?

— We are making a chain of Russian oil purchases through intermediary companies so that the intermediary company appears in the contracts, and not a direct supplier from Russia, which can be legally associated with sanctioned Russian companies. I think that in the near future such tools and mechanisms will be proposed and worked out, and China will return to purchasing Russian oil.

Given the Chinese experience they have gained in cooperation with Iran, I think there will be no problems there. Most likely, trading in national currencies will continue and various schemes will be used with intermediaries on the Chinese side who will purchase Russian oil from Lukoil and Rosneft.

Perhaps they will also offer their intermediary companies through which the trade will be carried out.

In my opinion, there will be a problem with the Indian side. Forty-five percent of Russian exports today are focused on India. India is in the process of trade negotiations with the United States, where they explicitly say that one of the conditions is to abandon Russian oil.

— What about the shadow fleet?

— Currently, the number of shadow fleet vessels detected by Western countries in transporting Russian oil in violation of the price cup and sanctioned is 557 vessels, while the total number of shadow fleet vessels is estimated at 950-960. In fact, two thirds of the vessels are formally sanctioned by Western countries.

They cannot be serviced in European ports, they cannot transport any other oil except Russian. In this situation, we see that many vessels from the sanctioned shadow fleet continue to transport Russian oil.

They simply have no other option, they work as shuttle ships transporting Russian oil on routes between Russia, China and India. A good example can be given in the field of LNG transportation. Since August, shipments from Arctic LNG-2 have resumed. Gas carriers included in the US sanctions lists regularly carry LNG and unload it in China. Everyone knows about it, and everyone is ready for the sanctions consequences. The legal framework is designed in such a way that these consequences are minimal or zero.