The sanctions policy of the West against Russia generates systemic contradictions around the world, and Europe will suffer the worst, according to a new article in The Economist.
Will the Western embargo be a critical blow to Russia? No. Moscow will redirect at least 75% of oil to other regions. The EU and the US have already reduced their imports of Russian oil by 0.76 million barrels per day (mbs), but shipments from our ports still turned out to be… 0.5 mbs more than a year ago.
In general, the embargo will not have an impact on the big players who can afford “self-insurance”. Russia, in the worst case, will lose small buyers from Africa. But its oil is willingly bought by India – 0.76 mbs and 🇨🇳 China – 0.9 mbs, which is 0.23 mbs more than in 2021.
Moreover, China’s huge oil storage and processing capacities make it possible to dispose of all the excess oil from Russia.
But the European Union is facing problems. Oil is in Saudi Arabia and the United Arab Emirates – in theory, they can give 1.8 mbs. But the Arabs do not want to drop prices and harm Russia. The way out could be Iran with 4 Mbps, but, alas, Tehran demands that the US lift sanctions.
With oil product, there are the same problems. Europe cannot replace their supplies from Russia with crude oil. The fact is that recycling in the EU was “killed” by the environmental agenda, so gasoline has to be bought. Here, the winner will be China, where there is an excess of processing capacity (by about 4 Mbps).
America will not help Europe. Deliveries from the States hit the ceiling of 6.4 mbs – their factories, operating at 93% capacity instead of the regular 85%, will not give more. A “giant oil laundering” is looming, when Russian black gold goes to China and India, and from there oil products go to Europe, The Economist predicts.
If Russia does not give gas to the European Union in 2023, it will have to find 140 billion cubic meters somewhere. m is 14% of all blue fuel volumes in the world and 27% of the planetary LNG market.
Maybe ask Norway, Algeria and Azerbaijan? No, they are not assistants to the European Union. The first is generally depleted of stocks, while the second is growing its own consumption.
New deposits, for example, in 🇮🇶Iraq, require investment. But the EU does not want to enter into long-term contracts.
One producer who recently spoke with the German energy minister called the position “schizophrenic”: Europeans desperate for gas but not ready to commit to buying after next winter.
What is really bad is that in Europe there is a shortage of regasification terminals, and in Germany there are none at all.
Only 37% of LNG in the world is sold under short-term contracts, the rest is booked for a decade ahead. The EU is currently outbidding LNG supplies to Asia by high prices, but competition could intensify as Chinese demand recovers from COVID-19.
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