HomeMediaLatest NewsThe West has restricted Russian oil products: who benefits from this decision

The West has restricted Russian oil products: who benefits from this decision

07 February 2023

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to Forbes on the consequences for Russia from the entry into force of the price ceiling and the EU embargo on the sea supplies of Russian petroleum products from February 5.

The export of Russian petroleum products will decrease by about 50% in the next two to three weeks, Alexey Gromov believes.

"Our customers in the previous months bought petroleum products for the future on the eve of the embargo, —the expert says. — Many bought with a reserve, so it does not make sense for them to further increase the volume of supplies. According to data at the end of January, Russian exports of petroleum products were quite stable and kept at the level of 2.3-2.4 million barrels per day, that is, about the same as it was for most of last year and earlier." According to Gromov, at the end of January, before the embargo was imposed, about 45-46% of the volume accounted for Europe. Of this volume, 55% of deliveries were diesel fuel and 20% — fuel oil. "Fuel oil can be redirected, and Russia is already doing it," the expert says. — China buys our fuel oil, which can be used as raw materials for the production of other petroleum products. Diesel fuel has not yet found sufficient sales markets."

After the fall in exports, a gradual recovery will begin, Gromov believes. "But if in the case of oil, such a recovery took about a month after the embargo and the oil ceiling came into force in December, then this process will go slower with petroleum products, since it will be extremely difficult to attach the entire range of petroleum products to other markets," the analyst argues. To overcome the negative consequences of the embargo, Russia will increase crude oil exports.

Who will be of benefit

If you look at the embargo and ceilings through the eyes of Western countries, then their main idea is very pragmatic: they do not want Russian oil and petroleum products to leave world markets, their main task is to reduce Russian budget revenues, Gromov notes.

"We can already see this in oil: exports recovered to record levels last summer, but revenues from it decreased," the expert says. — These sanctions, unfortunately for us, are currently working. Therefore, I am sure that the Europeans will support the swap system with the same India and buy more Indian oil products, turning a blind eye to the supply of Russian oil products to India, if only it could make up for the falling volumes."

Alexey Gromov believes that Europe will take more oil products primarily from the Middle East and India, and the United States will provide some support to it within its capabilities.

"This redistribution in world trade will not be optimal," the expert notes. — And first of all, it is not optimal for Russia — we will lose profitability from our oil products. Europe will receive petroleum products from India, which, taking into account the transport shoulder, will be supplied at higher prices than from Russia. The winners will be the United States, which will be able to increase oil and diesel exports, and India. Also, the Persian Gulf countries, which have never had any particular problems with where to send oil products, will benefit in a certain way, and now they will have additional opportunities."

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
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