FRANKFURT (Germany), March 27 (.).- Russia is diverting its exports to China and India to circumvent sanctions by the European Union (EU) and other countries over its aggression on Ukraine, which has allowed its crude oil to remain stable. Sales, according to the European Central Bank (ECB).
An article in the next ECB Economic Bulletin, published this Monday, analyzes how the sanctions are affecting Russia and how they have affected the prices of crude oil and its derivatives.
Russia leads its oil exports to Asia, China and India
Russia began diverting its oil supplies before the EU and G7 sanctions and price caps took effect.
“Before Russia invaded Ukraine it was exporting about 8 million barrels of oil per day to various trading partners,” ECB economists say.
Two-thirds of those sales are crude oil and the rest refined petroleum products.
At the start of 2022, roughly half of Russia’s oil exports consisted of supplies to the EU, but trading partners changed a lot throughout the year.
Therefore, between February and November 2022, seaborne crude oil sales to the EU fell by almost 70% (1.4 million barrels per day).
Russia has sent them back to Asian countries to maintain export volumes.
In particular, it exported more to China and India, which represented 70% of Russian crude exports in November 2022, when they did not exceed 20% before the Ukraine invasion.
The new EU sanctions contributed to a sharp 35% drop in Russian crude oil exports by sea in the first weeks after December 5, 2022, when supplies to the EU fell sharply when they took effect.
Exports to India, China and Turkey also fell when the new sanctions came into effect, although those countries did not apply price ceilings.
Subsequently, Russia’s crude oil exports have rebounded as it repatriates to countries that do not use sanctions.
ECB economists noted that “available figures are incomplete because significant quantities of Russian crude are classified when loaded onto vessels with undisclosed destinations.”
Overall, Russia’s crude export volumes are flat compared to November 2022 figures since the implementation of the new sanctions.
Despite increased production from Kazakhstan and Nigeria, oil prices have fallen 9% since December 5, 2022, when prices rose on fears of a shortage, unlike after Russia invaded Ukraine.
The European diesel market remains tense
In turn, the European Union increased imports of refined petroleum products from Middle Eastern and Asian countries at the start of the year, and boosted diesel imports from Russia before applying the ban.
ECB economists believe that the maximum price for Russian crude oil could have a greater impact on Russian exports in the coming months, as the embargoed countries try to keep the market price of Russian crude oil at a maximum of 5% below.
The ban could put further pressure on the already tense European diesel market, meaning the EU would have to buy barrels from the US and the Middle East.
Sanctions on Russia
New EU bans on crude oil imports from Russia came into effect on December 5, 2022 and a ban on petroleum products transported by sea from Russia on February 5, 2023.
The European Union and other partners have also banned the provision of shipping services to vessels of Russian crude and Russian oil products that do not purchase crude at or below a set maximum price.
The maximum price for Russian oil is set at $60 per barrel, which is higher than the current market asking price for most Russian oil exports, according to ECB economists.
Maximums have been established for refined oil: $100 per barrel for products such as diesel, kerosene and gasoline; and $45 per barrel for commodities such as fuel oil and naphtha.
These price caps attempt to limit Russia’s oil revenues while allowing Russian crude supplies on the world market to avoid sharp rises in international oil prices.
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