NEW – April 17, 2022
The globalisation of economic processes that the world has been building over the past 30 years has always been seen as a tool for stabilising partner countries in line with diplomatic solutions on a variety of issues. For decades, Russia-West relations have been based on a model in which domestic hydrocarbons have been integrated into the chain of exchange for goods and technologies. In 2022, European countries and the United States for the first time in history tried to destroy it as a punishment.
One of the victims of the sanctions war inevitably became the supply of fuel and energy complex – coal, oil and gas. However, in reality, the sword that was supposed to hit one target suddenly hovered over the person holding it. The statements of OPEC leaders, where they repeatedly and quite clearly explained that they were not going to solve the problems of geopolitics and would not displace Russian “black gold” from the market, somewhat cooled the ardor of European partners.
The most fervent calls to abandon Russian oil come from overseas, in the United States. Moreover, American lawmakers are waiting for such steps, including from their colleagues in the Old World. But the demands, despite the emotional solidarity of some European leaders, are naturally broken by the skepticism of the real state of affairs.
For many years, Russia has been one of the three leading exporters, which also includes Iraq and Saudi Arabia. In 2020-2021 Russian exports of oil were estimated at 5 million barrels per day. Oil products accounted for about 2.8%. Approximately 3 million barrels of oil and 1.3 million barrels of oil products went to the EU countries.
Obviously, such a large volume cannot be quickly replaced by oil from other countries for a variety of reasons. First, refineries are designed for a specific grade, each of which has its own chemical composition. By changing the supplier, the European industry will have to take on serious costs for re-equipping production facilities, as well as solving logistics issues. At the same time, the situation is developing against the background of a general trend towards an increase in oil prices, which is due to a decrease in oil production in a number of countries, including Russia.
According to the agreement with OPEC+, Russia must increase production to reach the target of 10.5 million barrels per day in May 2022. At the same time, analysts note the growing demand for oil, even to a greater extent than previously predicted. At the same time, OPEC member countries are in no hurry to quickly increase production due to many years of work in the opposite direction and restraining growth.
Rising oil prices
Even without taking into account the geopolitical situation on the continent and possible risks with the supply of hydrocarbons from Russia, the situation leads to an increase in prices. It seems that the old industry is not ready to pay for the new device of the world out of its own pocket. Especially with the simultaneous rise in the price of gas, which, by coincidence, is also exported globally from Russia.
To somehow resolve the impending crisis, the United States turned to the countries of the Persian Gulf – Saudi Arabia, the United Arab Emirates and Qatar-with a proposal to increase their supplies in order to push Russia. However, countries responded negatively to this proposal. According to analysts, Saudi Arabia is also limited in its ability to increase production.
On April 12, OPEC Secretary General Mohammad Barkindo announced that it is impossible to replace Russia in terms of oil supplies to the European Union.
“It would be almost impossible to make up for a loss in volumes of this magnitude,” said Mohammad Barkindo.
He added in the framework of the EU-OPEC energy dialogue that due to sanctions, the world may face a loss of Russian oil exports of up to 7 million barrels per day.
The fact that hydrocarbons, both oil and gas, will be very problematic to replace, was publicly stated recently by Austrian Chancellor Karl Nehammer. Similar opinions are broadcast by the German authorities, where a forecast was recently published, which was prepared by the country’s leading economic researchers. As follows from the document, in case of refusal of gas and oil supplies from Russia, the German economy will lose hundreds of thousands of jobs, which will lead to a serious recession and a decrease in GDP by 2.2%.
As experts of the Financial Times consider, in this way the German government is preparing the ground for creating the necessary information background in order to reject the calls of hotheads who demand an immediate refusal of exports from the northern partner.
In the final analysis, the picture of economic canceling demonstrates a clear paradigm of the global economy – one can not painlessly pull out a working link from a chain built over the years. Even in the case of a gradual abandonment of Russian oil, the EU economy must be prepared for the most serious costs of re-equipping its production facilities, restructuring logistics and buying oil at high prices, which will ultimately be expressed in prices that will be paid by ordinary Europeans.
War against fakes
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