“Vitol will repeat Shell’s Latvian trick”: companies have found a way to buy oil from Russia

Sergey Kondratiev commented to Gazeta.ru on the prospects for Russian oil supplies to the EU countries.

The cases of Vitol and the Indian Oil Corporation are actually very different, Sergey Kondratiev, a senior expert at the Institute of Energy and Finance, emphasized in an interview with Gazeta.Ru. At the same time, both European and Indian companies, in his opinion, will not risk completely abandoning Russian raw materials, despite its "toxicity".

“The story of the refusal of the Indian Oil Corporation to purchase the Russian Urals is an isolated case, by no means a trend. Moreover, other varieties fell under the distribution, including Das, Eugene Island, Thunder Horse. Local refineries needed low-sulfur oil. From the outside, India's refusal looks like a political gesture, but in reality everything is much more prosaic,” the analyst suggested.

Against the backdrop of possible oil restrictions, which may be included in the sixth EU sanctions package against Russia, the only real opportunity for Moscow to keep high demand for the Urals brand will be to increase the discount on it. As Western sanctions pressure on Moscow intensifies, the discount could grow by several tens of percent, Kondratiev suggested.

He added that if the EU nevertheless decides to impose serious restrictions on oil trade with Russia, up to an embargo, our companies will be forced to further increase the discount. This measure will help maintain the key positions of India and China in Russian oil exports.

“With stock quotes for Urals at $70 and Brent over $100, the Russian budget, of course, loses millions of dollars compared to the usual discounts of our brand to the North Sea $1-2 per barrel. However, in the current scenario, Russia can compensate for the losses by sharply increasing the volume of oil exports to Asia,” Kondratiev said.

According to him, in the event of a European embargo on oil trade with Russia, the Urals brand discount could reach the previously unthinkable $40-50 per barrel of Brent.

How will this affect Russian exports?

According to Kondratiev, even given the current negative reputation of Russian oil, Western counterparties may continue to use a certain “loophole” to bypass trade restrictions with Moscow.

“End-consumers in Europe can easily find traders other than Vitol who will agree to sell Russian oil to them. The same "Lukoil" has a Swiss "daughter" Litasco.

This method will help to circumvent potential sanctions, because crude oil will be purchased in the EU through traders located in the zone of influence of European jurisdiction. As a result, such a trade option will help Moscow partially compensate for the export of raw materials decline, and the Europeans - to keep a key oil supplier, the analyst concluded.