HomeMediaLatest NewsAn oil embargo: not yet critical, but, it seems, one not to come out dry from it

An oil embargo: not yet critical, but, it seems, one not to come out dry from it

06 June 2022

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, president of the Institute for Energy and Finance, commented to Moskovskaya Gazeta on introducing the oil embargo.

Approximately half of Russia's exports of oil and oil products go to Europe, Marcel Salikhov said in an interview.

“The world market is so arranged that if there is no new supply, the flows flow from one place to another. We have seen lately that Russia has increased supplies to Asia, namely to India, and those oil flows that did not come from Russia to Europe were replaced by producers from the Middle East. The main effect of the embargo will be associated with a change in the market configuration. But it can hardly be considered that it does not matter at all, that everything would be perfectly configured and working. Is it possible that stream redirection will be painless? It is possible that some volumes of exports, including oil products, will be lost. Bloomberg wrote that Russia could lose $22 billion. This is a conditional assessment. It is difficult to accurately determine the damage,” said the source of the publication.

Subsequently, there may be any losses?

“It is possible if the situation develops according to a negative scenario: for example, if Saudi Arabia increases production, a global economic crisis sets in, demand for oil decreases, oil prices decrease, and they can decline rapidly,” the expert suggested.

Can it happen that the redirection of raw materials flows will face infrastructural difficulties?

"Maybe. But here it is necessary to separate oil and gas. As for gas, there is no way to redirect flows to other markets - you need to create a new infrastructure, lay a pipeline. Oil transportation is easier. This is sea transportation, mainly by tankers. There is also the Druzhba oil pipeline, but this is only 20% of Russian exports to Europe. And the infrastructure for shipping oil to the EU through the northwestern ports or through Novorossiysk in the south already exists. But it is important not only to deliver oil to the port. The transport time to the EU is a week or two. Swim to India - a month. If earlier it was possible to unload one volume of oil with one tanker, now two are needed. The need for tankers is increasing due to the increase in the transport distance. Plus, a variety of payments, cargo insurance. This also complicates things. So far, all these logistical issues are interrupted by a discount on oil: $ 30 will pay for everything. I think all these problems will be gradually solved,” the expert explained.

If Europe is determined to give up Russian oil, then to give up Russian gas - not so decisive?

“The Europeans understand that they cannot impose a gas embargo. But they intend to gradually phase out Russian gas, Marcel Salikhov says. - The official plan of the European Commission is to do this by 2027. Maybe it will not be 2027, but 2030. It is possible that some volumes of gas supplies will remain. But the fact that in the long term the volume of Russian gas supplies to Europe will decrease this year, next year and so on is so far the case.”

You will receive notifications about the release of new materials on the site. We do not share email addresses with third parties and do not spam.
Thank you!
Your application is accepted.