Russia intends to supply oil mainly to friendly countries

Russia plans in 2023 to supply more than 80% of export volumes of oil and 75% of oil products to friendly countries. This was announced by Deputy Prime Minister of the Russian Federation Alexander Novak in an article for the Energy Policy magazine.

Thus, unfriendly countries may account for up to 20% of Russian oil exports and 25% of oil products. According to the order of the Russian government No. 430-r of March 2022, the list of unfriendly countries includes the states of the European Union (EU), the UK, the USA, Canada, Japan, South Korea, Australia and a number of other countries that joined the anti-Russian sanctions after the start of the NWO in Ukraine .

“As for supplies to states that support illegitimate price restrictions (the introduction of a price ceiling on Russian oil and oil products. – Vedomosti), here our position is widely known and remains unchanged: such countries will not receive Russian oil,” Novak added.

Russia continues to supply oil to some unfriendly countries, which were temporarily given exemptions from the sanctions regime and allowed to buy raw materials from the Russian Federation. In particular, exceptions are made for Hungary, the Czech Republic and Slovakia, which receive oil through the Druzhba pipeline, Bulgaria (marine deliveries are allowed) and Japan (imports oil from the project “Sakhalin-2“). Deliveries through Druzhba in 2022 increased by 7% yoy to 38.4 million tons, but already in January 2023 they began to decline due to a decrease in imports to Germany and Poland.

Russian oil products will also be able to enter the European market. An exception was made for them from the sanctions restrictions. The European Commission (EC) clarified in early February that oil products from Russia do not fall under the price ceiling if they have been “significantly processed or mixed with other fuels in a third country.” Before the start of sanctions, Europe was the largest market for Russian oil products, with the region’s share of Russia’s exports amounting to 62% in 2021.

Vedomosti sent clarifying questions to Novak’s office and the press service of the Ministry of Energy.

Novak recalled in the article that after the start of the NWO in February 2022, the EU, the US and the UK began to abandon Russian oil and oil products. On December 5, 2022, the EU embargo on offshore oil supplies from Russia came into force, on February 5, 2023 – on oil products. At the same time, marginal prices began to operate at which unfriendly countries are ready to buy Russian oil and refined products. The oil price cap is set at $60/bbl. There are two ceilings for oil products: for more expensive oil products (for example, diesel fuel) – $100/bbl, for cheaper ones (fuel oil) – $45/bbl.

In response to the introduction of price ceilings, Russian President Vladimir Putin signed a decree at the end of December 2022 prohibiting Russian exporters from supplying oil and oil products under contracts that establish such a link. As a result, Russian oilmen began to build new supply chains.

For example, in order to redirect supplies to friendly countries, fuel transportation to the Far Eastern port of Kozmino was increased. This made it possible, according to Novak, to deliver 42 million tons of oil from the port to the countries of the Asia-Pacific region (APR). Earlier, Transneft President Nikolai Tokarev specified that the transshipment capacity at the port of Kozmino in 2022 increased to 42 million tons from a design capacity of 30 million tons. India and China became the largest buyers of Russian oil in the Asia-Pacific region.

The total export of oil from Russia, according to Novak, in 2022 increased by 7.6% compared to 2021 to 242 million tons (4.9 million barrels per day – Vedomosti).

In 2023, oil companies continued to increase oil supplies to Kozmino. But since the capabilities of the East Siberia-Pacific Ocean (ESPO) pipeline were no longer enough to meet the ever-increasing demands of oil workers, for the first time since 2016, regular deliveries of oil to Kozmino by rail began (Vedomosti wrote about this on February 7). In January 2023, deliveries were 80,000 bbl/d.

Experts interviewed by Vedomosti consider plans to send 20% of all oil exports to unfriendly countries realistic.

According to Ekaterina Krylova, managing expert of the PSB Center for Analytics and Expertise, in 2023 Russia can send about 15-20% of all export oil volumes to unfriendly countries. According to her, about 250,000 barrels per day will flow to Hungary, Slovakia and the Czech Republic through the Druzhba oil pipeline. Deliveries from Sakhalin, where oil is mainly imported to Japan, according to Krylova, will amount to 280,000 barrels per day, and exports to Bulgaria – about 90,000 barrels per day. In total, these countries will account for 620,000 barrels per day. It is also possible to supply oil to the EU through Turkey, adds Krylova. Igor Yushkov, a leading analyst at the National Energy Security Fund, recalls that deliveries via Druzhba also continue to Poland, which “plans to finalize the current contract” (the plan for 2023 is 3 million tons, or 60,000 barrels per day. – Vedomosti “).

According to Vedomosti’s calculations based on data from the Federal Customs Service (FCS) of Russia, the share of oil exports of countries that were classified as unfriendly in 2022 was about 59% in 2021, and 73% in the export of petroleum products. The total volume of exports of oil and oil products amounted to 231.6 million tons and 144.3 million tons, respectively.

The FCS did not publish data for 2022. According to Krylova, in December 2022, friendly countries accounted for 68.8% of oil imports from Russia.

According to Senior Analyst,BCS World of Investment” by Ronald Smith, most of the 20% of oil exports and 25% of oil products that will be supplied to unfriendly countries will be provided mainly through sea supplies and “certainly refers to gray schemes.” Some oil will also be delivered to the EU via the Druzhba pipeline, he adds.

Yushkov adds that Russia this year may change the structure of exports, supplying less oil products and more oil abroad.