London, Europe Brief News – Moscow has the capabilities to respond to European sanctions on Russian oils by seeking other buyers for its crude oil. Besides that, Russia can also cut production to keep the prices high.
Whatever Russia plans to do can have a global economic impact unless OPEC intervenes. On the other side, EU leaders have agreed to ban 90% of Russian Crude by the end of this year.
According to the International Energy Agency, Russia is the World’s third-largest oil producer after the US and Saudi Arabia and the second-largest crude oil exporter behind Saudi Arabia.
Hossein Askari, A professor at the George Washington University School of Business, said, “What is going on now will change oil and natural gas trade into the future. Oil prices will not decline any time soon, and the fall out of Russian sanctions will be felt for a few years”.
He added, “The US should have used strong preemptive sanctions on Russia and been tougher with OPEC oil producers to increase oil output.”
Dmitry Peskov, the Kremlin Spokesman, said, “Sanctions will have a negative effect on Europe, us, and the whole global energy market.”
Ways Russia Using to Avoid the Impacts of Europe Oil Sanctions
Moscow is looking for ways to prevent the economic crisis after the European agreed on the Sixth package of sanctions. The package includes a ban on 90% of Russian crude oil.
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1-Hunting for other Buyers
Whether Russia is able to prevent the severe impacts of Europe oil sanctions or how much it can sell to another buyer will become the deciding factor of oil prices globally. Roughly 36% of the EU’s oil imports come from Russia.
Mikhail Ulyanov, Russia’s permanent representative to international organizations in Vienna, said, “the country will look for other buyers for oil.”
Moscow is already dealing with two buyers for its Crude: China and India. These countries have been buying discounted Russian oil, and industry watchers believe it will keep going.
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India traditionally imports very little crude oil from Russia. As per records, it was 2% to 5% a year. But now, according to the market watchers, its purchases have gone sky high in the last few months.
India bought 11 million barrels in March, which jumped to 27 million in April and 21 million in May. China was already the largest single buyer of Russian oil, but its recent oil purchases have also grown.
China has bought 14.5 million barrels, a massive increase from the same period last year.
2-Production Cuts
Russia is also considering cutting crude production and exports to stop further damage to its finances. Other players may come forward if Russia does that to fulfil the need.
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Leonid Fedun, Vice president of Russian oil firm Lukoil’s Vice President, said, “the country should slash oil output by up to 30% to push prices higher and avoid selling barrels at a discount.
Officials in Washington have shown their concern that Moscow might move to upend an orderly year-end wind-down by slashing exports over the summer to inflict maximum economic pain on Europe.
Edward Gardner, the Commodities economist at Capital economics, said, “For Russia, we think higher prices will mostly offset the impact of lower export volumes this year.”
He also suggested that there are high chances that Russian oil production and exports will fall by 20% by the end of this year.
If Russian output drops, another player may step up to help tame prices. As per different reports, Saudi Arabia is prepared to increase crude production if Russia’s output significantly falls following European Union sanctions.
3-Deceptive Shipping Practices
According to maritime artificial intelligence firm windward, there have been 180 ownership changes of vessels from Russian entities to non-Russian ones since the beginning of the Russia-Ukraine war.
Windward said those changes recorded in just three months were already more than half of ownership changes for Russian vessels in 2021.
Many of the Russian vessels were sold to firms based mostly in Turkey, Singapore, United Arab Emirates, and Norway.
4- Moscow demand Countries to Pay in Rubles for Gas
Moscow has demanded that clients from unfriendly countries, including EU member states, should now pay for their gas in rubles.
The new requirement is seen as a measure to side-strap Western Financial sanctions against Russia’s central bank imposed over Moscow’s offensive in Ukraine.
So, Russia has suspended natural gas deliveries to Poland, Bulgaria, and the Netherlands for refusing to pay in Rubles.
Conclusion
Russia is currently finding a way to avert the losses they may get as European leaders agreed on the sixth package of sanctions. Russia is looking for other buyers interested in buying much cheaper oil to fill the gap. Whatever Russia is going to do certainly impacts global oil prices.
