The volume of Russian oil supplies to the West has fallen tenfold: the losses of the European Union countries have been calculated

What are the risks of eastern export direction?

The export of Russian hydrocarbons is almost completely reoriented from the western to the eastern direction. As Deputy Prime Minister Alexander Novak said, in 2023, our oil supplies to Europe decreased tenfold, and China and India became its main buyers. Increased sales of raw materials to these countries allows domestic producers to bypass the $60 price ceiling imposed by the West, but at the same time risks making Russia dependent on new Asian importers.

Russian oil is in demand all over the planet. According to the deputy chairman of the government, many states are interested in purchasing energy resources from our country, in particular, consumers in Latin America and Africa. Export in this direction is still finding ways, but it already looks clearly attractive. True, for now the main destination is Asia: domestic exporters are concentrated on China and India. China’s share has grown to approximately 45-50% over the past two years, and export volumes to India, where, according to Novak, previously there were “virtually no supplies,” literally increased before our eyes to 40%.

“In 2022, Russia sent approximately 40 million tons of oil and petroleum products to the East out of 220 million tons that previously went to the EU,” notes financial analyst and private investor Fedor Sidorov. — This year the West will miss at least another 140 million tons of Russian “black gold.” It is easy to see that prices for Brent are not falling (now this brand is trading above $80 per barrel), and the discount for Urals has decreased. Russia sells oil to Asia at market prices, significantly higher than the ceiling set by the West.”

Growing volumes of supplies to China (up to 97.5 million tons) and India (almost 70 million) show the scale of the reorientation of Russian hydrocarbon exports and mark an increase in demand for our energy resources from states that do not want to impose economic sanctions on the Kremlin. In addition, the industrial prospects of new partners continue to please energy exporters: profits of China’s major companies rose by about 30% in November alone, giving confidence in their investment opportunities and expanding production capabilities.

Meanwhile, the losses of the EU countries from abandoning Russian hydrocarbons, according to the International Monetary Fund, promise to amount to $1.5 trillion, since the cost of transporting raw materials from other regions of the world, carried out mostly by sea, risks being much more expensive. “The world’s commodity traders are divided into three camps,” explains Alexei Yagodov, a marketer at one of the trading firms. — Some have completely abandoned trade in Russian oil because they are afraid of Western sanctions. Others continue to cooperate with our exporters, but prefer to carry out transactions through “gray” intermediaries, using sea transporters whose tankers continue to deliver oil at prices above the level set by the West. Still others, on the contrary, are increasing purchases from Russia, since they cannot be subject to secondary anti-Russian sanctions. It is almost impossible to convict them of selling “toxic” Russian raw materials for both technological and legislative reasons.”

At the same time, Russia also does not benefit from the closure of the European energy market. “It will take several years to build an infrastructure similar to the Western direction and redirect flows to Asian countries,” says Kirill Babaev, president of the National Coordination Center. — Having “two hands” for supplies to the West and the East, Russia will become more protected from the geopolitical situation and will be able to work in both directions if necessary. But focusing on one customer is dangerous.” Private Asian traders often focus on short-term energy contracts, since they can earn excess profits.

Despite the current successful reorientation of trade flows, the risks of concentration on a few large buyers are increasing. “China and India, aware of Russian foreign economic problems, can put pressure on prices and other terms of contracts. — warns BitRiver financial analyst Vladislav Antonov. “If these markets are lost (or purchases are reduced), Russian producers will have new problems in exporting energy resources.” To reduce Russia’s export risks, it is important to de-diversify supply directions by increasing sales to other regions – Latin America and Africa, whose states not only need additional energy resources, but are also able to pay for them. Continuing to focus on exports only to Beijing and Delhi, the expert warns, could lead to an unpleasant result – Moscow will have to fight to sell every barrel.