News: Sanctions against Russian oil reached the point of absurdity – Expert

In the “Official Journal of the EU” on Wednesday, there was a request-appeal to local importing companies to prescribe in their contracts a clause on the absence of Russian oil in supplies, including in various mixtures. However, exporters in this case are contractually liable for any incorrect statements.

The document emphasizes that “economic operators involved in importing crude oil and/or refined products are advised to take all necessary due diligence measures to ensure that crude oil subject to sanctions against Russia is not imported, even if it is blended with more part of the oil originating in a third country and prove that this is the case, except in cases where the exact proportion of the product originating outside of Russia cannot be clearly demonstrated to the national authorities of the Member State.” It is proposed to do this with the help of documents on the origin of oil, as well as with the help of chemical analyzes.

Paradoxically, despite the rather absurd nature of the recommendation, it is more likely to be considered an easing of sanctions than their strengthening. In fact, the EU provides a “loophole” for the sale of various blends of oil. At the same time, the recommendation itself, since it is not of an official nature, can not be implemented for the time being.

Stanislav Mitrakhovich, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund, noted that until December 5, 2022, the date of a complete ban on the import of Russian oil, some importers can simply ignore such “advice”. Well, how control over oil and the composition of mixtures will take place after the embargo is introduced is still unknown.

“I think that everything will happen depending on how the Europeans themselves will look at their own rules: carefully or through their fingers. If they keep a close watch, they can probably create a special control system. For example, if a tanker has loaded oil, but it does not have confirmation that it is not Russian, and they simply will not let it through. Although, most likely, oil from the Russian Federation will enter the European market even after December 5th. Otherwise, it will be reoriented to other regions of the world,” he told Expert.

At the same time, the practice of selling mixtures is not always profitable for Russian oil companies, Stanislav Mitrakhovich believes. In order for fuel from the Russian Federation to be mixed with other varieties, exporters need to carry out additional manipulations and pay intermediaries.

“However, such an operation can be carried out. As an example, it was not possible to “strangle” Iranian oil completely, it is supplied somewhere. It is difficult to say whether Iranian oil enters the European market, no one officially admits this, indirect methods of analysis are approximate,” he stressed.

Stanislav Mitrahovich reminded that if European importers do not take into account the EU recommendation, there will also be self-sanctioning of traders. “A trading company or its subdivision may not use Russian oil, but use a mixture with its presence. But due to public pressure, the same Shell, for example, abandoned this practice, although in fact it did not violate anything. On the other hand, such an initiative can easily be adopted by other companies that are not under such scrutiny,” he concluded.

EU eases sanctions grip

At the same time, Igor Yushkov, a leading analyst at the National Energy Security Fund and an expert at the Financial University under the Government of the Russian Federation, recalled that EU statements that it would be prohibited to import Russian oil as part of a mixture were previously. Then the European authorities argued that mixing several varieties would not become a “loophole” for importers, but such a scheme was still used. An example is the “Latvian mixture”, which included up to 49% of Russian oil and 51% of other (most often Norwegian) fuel.

Now, the expert believes, there is a feeling that the EU is somewhat softening the heat and specifying that the mixture will be banned for sale if the percentage of Russian oil used is not indicated in the documents.

“However, if Russian oil was mixed, then it was indicated that there was a share, then, accordingly, the tanker could be unloaded, leaving the “Russian” part of the cargo on board based on the indicated volume. And to some extent, this is even an indulgence, because earlier in the EU they said that if at least a drop of Russian oil got in, then it was impossible to sell the mixture, ”he said, adding that most likely the same would apply to other oil products. rule.

Igor Yushkov is sure that the composition of the mixture will be clarified exclusively according to the documents. “Of course, no one will carry out any analyzes, because each tanker must have accompanying documents. If you find fault, you can, of course, fully establish where and what came from. Yes, companies will be held accountable, but in fact, they are simply intimidated by secondary sanctions. And they plan to impute to them precisely the violation of the sanctions regime, spreading fines,” he stressed.

Thus, the EU actually counts on the fact that importers will be afraid of the possibility of being caught buying Russian oil, and that regulators’ fines will be higher than earnings from the sale of raw materials from the Russian Federation.

“And here it really comes down to the efforts of the Europeans. Of course, part of Russian oil will still enter the market, they will simply forge documents. The one who was already engaged in all sorts of sub-sanction actions and smuggling will continue to do so. Just arrange it differently. There is 100% of Russian raw materials in the tanker, and he will indicate in the papers that 1% is all, ”the expert summed up.

The question remains whether Europe is ready for a retaliatory economic blow, which will be inflicted not even by Russia, but by the conjuncture of the world market. Despite the fact that, having lost European buyers, the Russian Federation will probably earn less on oil than it could, the embargo will lead to a further increase in prices for this type of raw material for Europeans. By refusing to import from Russia, the EU will pull over the Middle East and African oil producers, supplies from the Russian Federation will finally be redirected to Asia. Russia will receive new markets, which, in principle, have already been actively developed over the past few months, the EU will receive the most complex supply chains from not very optimal sources. But as they say, the “mixture fighter” pays twice.

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