Detour maneuvers – Newspaper Kommersant No. 22 (7467) dated 02/07/2023
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The influence of the “ceiling” of oil prices in the Russian Federation, set by the G7 countries at $60 per barrel, cannot yet be unambiguously assessed due to the simultaneous embargo on its import to the EU and changes in the logistics of supplies in favor of India, experts from the Institute of International Finance (IIF) fix . With a reduction in the discount to Brent and an increase in oil prices, the effectiveness of the “ceiling” will depend on the ability of Russian companies to export oil on non-Western tankers, the institute believes. The reversal of deliveries to the east will also require a revision of pricing for tax purposes – now Urals quotes take into account the cost of logistics when delivering to European ports. The counter flow of goods to the Russian Federation, on the supply of which the G7 and the EU have imposed restrictions, according to the IIF, is already being realized through China and Turkey, which have sharply increased their shares in Russian imports against the backdrop of its multiple reduction from developed countries.
The effectiveness of the Russian oil price ceiling introduced by the G7 countries at $60 per barrel (together with it, a ban on its supplies to the EU countries since December 5) will depend on the speed of adaptation to new logistics, while the consequences of its introduction are difficult to assess , according to a review by the Institute of International Finance (IIF). The European embargo itself has led to an increase in the discount in pricing Urals compared to the cost of Brent due to higher logistics costs for its supply, and the effect of the ceiling may become more noticeable if prices rise, the authors of the review indicate.
The institute predicts a gradual reduction in the discount as new logistics schemes are built, noting that the effectiveness of the “ceiling” will depend primarily on the size of the “shadow” fleet of oil tankers for the transportation of Urals, which allows you to bypass the requirement for its maximum price. Western companies that own tankers that will comply, on average, accounted for about half of all offshore deliveries of Russian oil, but the percentage of compliance in the ports of the Baltic and Black Sea is higher than in the ports of the Far East and the Arctic (the former has a high share of Greek ships), noted in the IIF.
Changes in logistics may also lead to an adjustment in the determination of prices for Russian oil for tax purposes – the price of Urals, which is published by the Argus agency, takes into account the costs of delivery to European ports.
By March 1, the government was instructed to prepare proposals to refine the methodology for calculating the price of oil and petroleum products in order to minimize the impact of sanctions on federal budget revenues, and the head of Rosneft, Igor Sechin, speaking yesterday at the India Energy Week forum in Bangalore, said that “the reference price for Russian oil will be formed not in Europe, but where supplies actually go and there are deals.”
“Restrictions on crude oil had virtually no effect on the volume of offshore oil exports, but led to a significant expansion of the discount in the price of Urals, which reaches about $30–35 per barrel. In the context of the restructuring of logistics, the Urals benchmark has become indicative and does not reflect the real revenue of Russian oilmen, but it is still used to calculate taxes,” says Igor Galaktionov, an expert on the stock market at BCS Mir Investments. New restrictions, according to preliminary estimates, may lead to logistical difficulties in the global fuel market, a reduction in oil refining in Russia and an increase in its export of crude oil. “Judging by the dynamics of oil quotes, bidders do not expect that the volume of supply on the world fuel market will significantly decrease,” he adds.
India has become the main destination for new supplies, and it is already increasing the supply of petroleum products to the EU countries, where the embargo and price ceiling for petroleum products from Russia have been in effect since February 5 ($100 per barrel for light petroleum products and $45 per barrel for dark ones). According to the International Energy Agency, in December, the export of Russian oil and petroleum products to India amounted to 1.6 million b/d (of which 1.4 million b/d accounted for crude oil) – this is 21% of the total volume of Russian supplies (only more to China — 1.9 million b/d, 25%).
At the same time, China became one of the main exporters of goods to the Russian Federation, for which the G7 countries and the EU imposed export restrictions as part of the adopted sanctions, according to a separate IIF review: the country’s share in Russian imports increased from 20% to 45% over the period from March to September 2022, the total trade turnover during this time increased by $ 27 billion compared to the same period in 2021 (official data on the foreign trade of the Russian Federation is closed). Such an increase in turnover made it possible to mitigate the final decline in all Russian imports – for the year it amounted to 16%, said Ruslan Davydov, First Deputy Head of the Federal Customs Service.
Among exporters to Russia, by the end of 2022, China became one of the few countries that increased shipments: by December, their volume, according to IIF estimates, exceeded December 2021 by about 10% (see also “Monitoring”); Only Turkey (since August doubled year-on-year) and Belarus (by a quarter) increased deliveries to the Russian Federation faster, with exports falling by 90% from the US and 1.5 times from the EU.
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