Russia now exports as much oil as before the Ukraine war. Volumes have remained constant in recent years. How can this be, despite the sanctions? Is the oil price cap ineffective?
Category
🗞
NewsTranscript
00:00 Russia is producing just as much oil as before the Ukraine war, and it's selling more liquefied
00:07 natural gas to the EU than ever before.
00:11 Russia has been able to maintain strong levels of oil exports comparable to those pre-war,
00:16 in fact, even with a little bit of an increase.
00:20 How can this be?
00:21 Didn't the European Union and G7 countries agree on sanctions against Russian oil and
00:26 gas exports in the summer of 2022?
00:30 The punitive measures were in response to Russia's invasion of Ukraine in violation
00:35 of international law, but so far they've had hardly any effect.
00:39 On the contrary.
00:44 Russia exported around 8 million barrels of oil each day in 2018.
00:49 This volume has stayed virtually constant over the past five years.
00:58 One of the measures agreed, tankers carrying Russian oil would no longer be allowed to
01:03 call at ports in the EU and G7 countries.
01:10 And the supply of oil to Europe via land pipelines would be severely restricted.
01:16 But the reality has been different.
01:19 Thousands of oil tankers, including some from G7 countries, are waiting to be refueled with
01:24 oil off the Russian ports of Novorossiysk and Murmansk, for example.
01:29 They're making deliveries across the Mediterranean.
01:33 Or like this Russian tanker via the Bering Sea, especially to Asia.
01:37 At first, the sanctions led to a fall in the price of Russian oil.
01:41 As a result, refineries in Asia have seized the opportunity and expanded their production
01:46 of fuels such as gasoline and diesel, which they can export profitably.
01:50 That's part of the reason why India and China have boosted their consumption of Russian
01:54 crude oil is because of the discount.
01:57 In many cases, those countries, China and India, buying cheaper Russian crude oil and
02:02 selling the refined product back on the global marketplace at a premium.
02:07 Another sanctions measure has been the $60 per barrel price limit for Russian oil, about
02:12 $20 below the market price, decided by the G7 countries and the EU at the end of 2022.
02:18 But that hasn't worked either.
02:21 A price cap of $60 per barrel was intended to limit Russia's foreign exchange earnings.
02:30 The normal oil price for Brent is between $80 and $90.
02:33 But the real trading price for Russian oil has climbed to over $70 currently, despite
02:38 the price limit.
02:39 How did this happen?
02:41 It also has to do with the price cap mechanism, which allows Western companies like shippers
02:48 and traders and insurers to continue facilitating the trade of Russian oil globally.
02:53 One reason loopholes in the oil trade and Western companies not being monitored well
02:57 enough.
02:58 What would be the solutions?
03:00 A, ensuring the price cap is functioning.
03:04 So really investigating the trade and being sure companies are complying with the existing
03:09 price cap.
03:10 And B, once that's in place, the obvious next move is to tighten the price cap and
03:14 to lower the price.
03:17 Another problem, Russia's flourishing LNG trade.
03:20 The sanctions against Russian gas coming to Europe via pipelines are taking effect.
03:25 But even greater volumes of Russian LNG are ending up at European ports.
03:29 In 2021, there were 16 billion cubic meters, or BCM, of natural gas.
03:34 In the first year of the war, 2022, it was already 22 BCM.
03:38 And in 2023, 13 billion cubic meters of LNG have been delivered so far.
03:43 By the end of the year, it's estimated that this figure will reach more than 22 BCM.
03:48 This year, European countries sent 5.3 billion euros to the Kremlin for LNG purchases.
03:58 And it's important to note also that there is no restriction on the trade of Russian
04:03 LNG when it comes to Europe.
04:06 The EU does not want to sanction Russian LNG until 2027.
04:11 Can Europe get through the winter without this liquefied natural gas?
04:15 For LNG, it's much similar to oil, where you have to replace a Russian ship with an American
04:21 ship or a Qatari ship, which is still a challenge.
04:24 And it might have a short run impact on prices, but it's eminently more feasible.
04:29 The EU and the G7 countries could already help themselves to LNG and oil on the world
04:35 market and switch to other suppliers.
04:37 And this way, better controls and stricter sanctions against Russian deliveries could
04:42 also be complied with.
04:43 (upbeat music)