Minus 40 billion per year: West imposes embargo on imports of petroleum products from Russia

Today, nearly a year after the start of the war in Ukraine, the West has placed an almost complete embargo on Russian oil exports, the Kremlin’s main source of income. The ban was not without exception, and the main one was the price ceiling. However, Russia’s share in the world energy market will decrease from 20% to 13%. The BBC writes about it.

Petroleum products include gasoline, fuel oil, diesel oil, kerosene and other refined products from Russia. The European Union, which decided to stop importing petroleum products from the Russian Federation in June, has been looking for an alternative market ever since. It is believed that this niche will be occupied by the USA and Middle Eastern countries.

Since the embargo does not affect Russia’s supplies to third countries, it is not expected to lead to a sharp decrease in Russia’s exports and an increase in oil prices. But the West hopes that the embargo will limit the price of Russian raw materials and revenues from which Vladimir Putin financed his invasion of Ukraine.

“The EU is stopping the purchase of Russian oil products from today, and therefore the Russian Federation is losing 40 billion euros on the market,” said Andriy Yermak, President of the Presidency.

However, an exception was made to the oil embargo for supply via the Druzhba pipeline – the EU banned only sea imports. The exception also applies to the embargo on oil and petroleum products. This is the ceiling price.

The last exception was lobbying in the United States to stem the decline in Russia’s exports, the rise in world oil prices, and worsening inflation in Western countries.

Fatih Birol, “I do not foresee major shocks. Some difficulties of the transition period are inevitable. However, global oil supply routes will be actively redrawn and important oil refining capacities are planned to be commissioned in the second half of the year.” The head of the International Energy Agency said before the embargo went into effect (IEA), on which forecasts in Europe and the USA are based.

The IEA estimates that the embargo will reduce the Kremlin’s export revenues by approximately $1 trillion by 2030 and reduce Russia’s share of the global energy market from 20% to 13%. The markets lost by the Kremlin will be occupied by the USA and Middle Eastern countries.

Overall, Russia accounts for 15% of the world diesel fuel market and until recently supplied 80% of it to Europe. Before the war in Ukraine, Europe imported half of all diesel fuel from Russia. Now deliveries will cost more.

As for Russia, it will also be harder to sell oil products than oil because of the tanker shortage. India and China, which buy oil at a discount, produce their oil products on their own.

Commenting on the new price ceiling, US Treasury Secretary Janet Yellen said, “Low- and middle-income countries will benefit first. The discounts help protect them from rising prices in the global energy market caused by Putin’s aggression towards Ukraine.” According to him, Putin will now face a choice: “to spend money on the war or use it to support the obsolete economy.”

According to the Finnish research center CREA, Russia is already losing about 160 million euros a day from the oil embargo and its ceiling, and the daily amount of losses will increase by another 120 million euros after the embargo on petroleum products goes into effect.

It was previously known that Russia uses intermediary countries and one-day firms to export its oil to the world market. It sells its oil through intermediary countries: Malaysia, United Arab Emirates, Iran and Venezuela. And he even repaints and renames oil-carrying tankers to “hide their tips in the water.”