How Moscow will bypass the EU oil embargo: fatal consequences outlined

The tanker is not afraid of sanctions: the EU has set marginal prices for Russian oil

Since December 5, tough Western sanctions have been introduced against Russian oil. The decision to limit the cost of hydrocarbons from the Russian Federation at $60 per barrel was published in the official journal of the EU. By their decision, the G7 countries and the European Union launched the transformation of the global energy market, the consequences of which experts assess as extremely unfavorable. Earlier, the Kremlin said that they did not accept the established framework. It is very likely that Europe will have to do without Russian oil at all, since Moscow has already made it clear that it will not supply it to those countries that maintain an anti-market price ceiling.

The EU has decided to limit the cost of hydrocarbons from Russia. The sanctions come into force on December 5. On the same day, the EU embargo on the import of Russian crude oil delivered by sea will come into effect. At the same time, it is allowed to provide insurance and other services to ships transporting “black gold” from Russia, if its price does not exceed $60 per barrel.

Finding a compromise on the level of the price ceiling was not easy for the West. For months, European leaders have been in tense negotiations. The leaders of a number of EU countries emphasized that such restrictive measures would only harm the European economy and exacerbate the energy crisis: an oil shortage on the global market would inevitably provoke an increase in oil prices. At the same time, those countries that have alternatives to Russian raw materials advocated a lower price.

And yet, literally two days before the entry into force of the long-announced ceiling, an agreement was reached. Poland remained the only EU country that blocked the introduction of a cap on the price level, demanding that it be made much lower – $30 per barrel. Despite this, a limit of $60 was approved. It was decided to revise the ceiling every two months, so that the price limit for oil from the Russian Federation would always be at least 5% below the market. Purpose: to limit Russia’s income from the sale of energy. Moscow, in turn, has repeatedly warned that it will not supply oil to countries that will support the introduction of this unprecedented restrictive mechanism.

The EU assumes that from tomorrow, shipowners will refuse to transport Russian oil if its price is more than $60 per barrel, due to fear of possible sanctions. Moreover, it is European and British shipping and insurance companies that dominate the world market in the shipping industry.

In order to prevent a complete logistical shutdown, Russia has taken care of its own fleet, which will be able to transport 80-90% of oil outside the mechanism of Western sanctions. Earlier, Western media reported that our country urgently buys tankers around the world to transport energy resources by sea. Shipping brokers estimate that more than 100 crude oil carriers have been purchased this year, including obsolete tankers that previously operated with “sanctioned” Iran and Venezuela. Thanks to them, Moscow is going to keep the flow of oil to India, China and Turkey – “friendly” countries that will become the largest buyers of Russian hydrocarbons after the introduction of the oil embargo, the Financial Times reported. There is no official confirmation that Russia is creating its own “fuel armada”. Although earlier Deputy Prime Minister Alexander Novak said that the country would increase its “supply chains” of oil, without specifying what is behind this.

The possible consequences of the decision taken by the EU cannot be predicted either by the countries that voted for the introduction of the restriction, or by Russia, against which the sanction is directed. According to TeleTrade analyst Alexei Fedorov, the beneficiaries of the introduction of the “price ceiling” mechanism for Russian oil will mainly be two categories of countries. The first is Russia’s direct competitors in the supply of oil and petroleum products to foreign markets – the OPEC+ countries, which will replace Russian supplies. The second group of beneficiaries includes countries that are friendly or neutral to Russia, which are mainly oil net importers. First of all, these are India and China, which will have the opportunity of practically unlimited access to Russian oil holdings, and even at dumping prices.

“As for the losers, first of all, these are the members of the European Union, the G-7 states, as well as the pro-Western countries of Asia (like South Korea and Taiwan). All of them will have to look for an alternative to Russian oil or buy ready-made oil products from India, China and other countries at higher market prices, plus incur higher transportation costs. So the consumers of these countries will have to experience the consequences of the Russian oil price ceiling mechanism,” Fedorov believes.