Russia’s losses from “oil” sanctions increase

An embargo on the supply of Russian petroleum products will have a serious impact on the Russian economy and Moscow’s ability to wage war on Ukraine, and the new blow could be more tangible than previous Western sanctions on oil exports. Russian crude oil.
Many analysts are inclined to this conclusion, including experts interviewed by the Russian service media.
Remember that the embargo will come into force on February 5. According to the Helsinki Center for Energy and Clean Air Research (CREA), with its introduction, Russia will lose around 280 million euros per day. And that’s a far cry from all the costs Moscow could possibly incur, CREA experts warn.
At the same time, according to CREA estimates, the damage caused to Russia by the restrictive measures introduced on December 5 by the G7 countries, the EU and Australia amounted to 160 million euros per day. .
According to Reuters, in accordance with the forecasts of Russian official structures, the production volume of Russian oil refineries (refineries) in 2023 will be reduced by 15% (from 272 million tons to 230 million), and oil production in the country will be fall to 490 million tonnes (9.8 million barrels per day) from 535 million tonnes in 2022.
The expert community also notes that there is not enough storage capacity for petroleum products in Russia.
According to the International Energy Agency (IEA), in 2022 Russian petroleum product exports averaged around 1.2 million barrels per day.
“December and February embargoes combined could reduce Russian oil exports by 1 million barrels per day”
According to the most conservative estimates, the share of countries that announced their willingness to impose an embargo on February 5, 2021 was 57% of all exports of Russian petroleum products, noted oil and gas sector analyst Mikhail Krutikhin in an interview with the Voice of Russian American Service, assessing the weight of the upcoming restrictions. In his opinion, it will be quite difficult, if not impossible, to attach somewhere the surplus of almost 80 million tons.
“Because, for example, India, Iran and the Persian Gulf countries are themselves exporters of petroleum products, and they absolutely do not need anyone else’s products,” he said. he explained. – They recently increased their own production. Therefore, I do not exclude that this 57% simply leaves the market.
Russian companies in the industry have only a narrow choice, said Mikhail Krutikhin: “Really reduce the work of the oil refineries that produce these petroleum products, limit the production of oil or try to increase the export of crude oil. But in the latter case, it will have to be sold at huge discounts. If we manage to find a market for additional volumes of crude oil, then some of the losses resulting from the loss of such a large market for petroleum products can be somewhat offset. However, I believe that oil production will still have to be reduced.
Moreover, the analyst believes that the embargo on petroleum products will be more effective than the previous restrictions of December 5. “If, in the case of the price cap, it was still possible to tie some of the crude oil released as a result of sanctions to buyers such as India, for example, at a significant discount, then this number would not does not work with petroleum products,” he concluded.
Moreover, according to Mikhail Krutikhin, the embargoes of December and February combined could reduce Russian oil exports by a million barrels per day or more by the end of the first quarter of this year.
“Fiscal revenues and the inflow of foreign currency into the country will inevitably decline, which under current conditions is already becoming critical”
The embargo will have a serious impact on the Russian oil industry and the economy as a whole, recognizes economic observer and publicist Maxim Blunt. According to him, Russia will have to reduce production, since already now the country’s large refineries of almost all oil companies, including Rosneft and Gazprom, face a massive refusal of railway workers to accept tanks with petroleum products to China due to “traffic jams”.
“There is no way to redirect exports to the East”, assures the source of media. – If the restrictions really start to work without failures and European countries do not turn a blind eye to attempts to circumvent them (and it is quite difficult to circumvent them), then Russia will have to, as a first step, reduce production of diesel fuel and other petroleum products and, on the other hand, to reduce oil production. Everything is logical here: since processing is reduced, production must be cut.
True, there is an alternative: you can try to increase crude oil exports, Maxim Blunt clarified: “But will it work – my grandmother said in half, and anyway it will have to be sold at even greater discounts than now. Thus, budget revenues and the inflow of foreign currency into the country will inevitably decrease, which in current conditions is already becoming critical.
However, the economist believes that the price cap and the European embargo of December 5 are quite effective. Revenues in Russian currency for the budget have seriously decreased. They began to decline even on the eve of the sanctions, but as a result of them. Buyers began demanding more discounts on Russian oil in November. And after the restrictions came into force, there was a drop in income from the export of Russian oil,” concluded Maksim Blunt.