The EU Bans Importing Oil Products From Russia
The EU bans refined products from Russia, continuing its December sanctions. In turn, Russia is searching for new outlets, keeping production levels up, and selling out its reserves of Chinese yuan.
The European Union imposed an import ban and a price cap on refined products of Russian origin, including diesel. These measures drive up the embargo on Russian crude oil applied in December. The goal of the current European oil policy is to affect Moscow’s earnings from energy.
For other countries, this means blocked access to insurance and transportation services if they decide to withdraw from the cap.
This measure will hit export revenues, but still, experts say implementation will be challenging. Russia is a global oil producer of jet fuel, fuel oil, and the like with particular prices for each. That would need separate caps from the actors making it harder to execute than previous bans.
Still, the banning is unlikely to toughen Russian oil production and export volumes. The exports are redirected from the EU to other countries. Now Russia grows the export of refined products to India and Africa (Senegal, Morocco, Tunisia, and Libya.) When the ban takes effect, the come-forward buyers will likely get Russian fuels with discounts.
Experts suggest that oil supply originating in Russia may bypass the European sanctions and find its way to the now-closed market.
To compensate for the revenue losses of 54%, or $6 billion, in the previous month, Russia is selling out its reserves of Chinese yuan. The Russian stockpile of major Western currencies is frozen; the country now has $45 billion worth of CNH in the wealth fund.
From Feb. 7 to Mar. 6, the finance ministry of Russia says to sell CNH worth 160.2 billion rubles (or $2.3 billion). Experts say the selling will cover the budget deficit for the following 2.5–3 years.
The February loading plans show that Russian possible oil exports to Turkey, Morocco, and Brazil from its three Western terminals will amount to 2.74 million tons. It is 2% more than the January plans and the highest high for these terminals in the last three years. But plans may be disrupted by the EU ban or even cancelled due to the price cap of $100 per barrel and increasing shipping costs.
