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Sanctions have targeted oil

13 May 2023

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented to Kommersant FM on the prospects for tougher Western sanctions against tanker deliveries of Russian oil and a ban on the use of the northern branch of the Druzhba oil pipeline.

Due to the introduction of restrictions against the shadow fleet, the prices for the transportation of sanctioned raw materials may increase, which will again lead to an increase in the discount on it. But the effect will be short-lived, the trend to reduce the discount will continue, Alexey Belogoryev says:

“The goal setting is not at all to reduce supplies from Russia, on the contrary, the West has always insisted on the stability of the total export of oil and oil products from Russia, so as not to undermine the stability of the global balance. Therefore, in this case, we are talking about an attempt to force Russian companies to comply with the price ceiling to a greater extent than now.

The desire to avoid a significant loss in Russian oil exports is a strong limiting factor for any new EU sanctions decisions. As for Russian oil prices, the discount is usually calculated in dollars, not in percentages, although this is not entirely correct.

Given the price cuts we've seen in recent weeks, the benchmark grade discount is now clearly down to $20, maybe even lower on many contracts. There is an obvious trend to reduce the discount, including through the optimization of freight, which was expected by many. If we are talking about the price at the port of shipment, then it is most likely formally still below $60.”

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