On February 5, the EU embargo on the supply of petroleum products with price restrictions came into effect, and earlier, on December 5, similar measures came into force on the supply of Russian crude oil.
The market of countries that have imposed an embargo on petroleum products accounted for 2/3 of all Russian exports of diesel fuel and fuel oil.
After that, Russia’s oil and gas revenues in 2023 will fall by at least 25%, the Ukrainian Institute of the Future predicts.
Sanctions on crude oil will have a moderate impact on oil production and exports to Russia, but a more significant impact on revenues due to the application of price caps. The Institute estimates (baseline scenarios for price and discount forecasts) that Russia’s overall oil export earnings could fall by 25-46% compared to 2021 if Russia does not resort to market manipulation and blackmail in response to the embargo.
Changes in the oil products market after the start of the embargo and price caps are much more difficult to predict than in crude oil. However, the export of petroleum products may be reduced by 20-35%. At the same time, having reduced the volume of oil refining, Russia will try to send this oil for export, but again it will sell it at a discount: “friendly” countries, although they did not support the sanctions, demand discounts, taking advantage of Russia’s hopeless situation.
At the same time, the significantly longer distances to China and India compared to EU countries mean higher transport costs, and thus the need to lower the price of oil in order to compete. The key markets for Russia will be India and China, which will refine Russian oil and export oil products, separately and to those regions that used to be the Russian market.
Russian budget deficit increased 14 times over the year
Oil products from Russia from February 5 cannot be imported into the EU
Source: Racurs
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