MOSCOW, February 6. /TASS/. The European Union’s embargo on supplies of petroleum products from Russia will hardly result in a notable reduction of crude refining by the end of 2023, though the revenues of the Russian budget and companies will be affected more, Principal Director on Energy Studies at the Institute for Energy and Finance Alexey Gromov told TASS.
On February 5, the embargo on maritime deliveries of Russian petroleum products to EU countries came into force, with sales of Russian fuel, mainly diesel, accounting for over 40%. According to figures provided by the Russian Federal Customs Service and the national statistics service Rosstat, Moscow exported 144.5 mln tons of petroleum products in 2021, whereas in 2021 in general petroleum products accounted for 14% of Russia’s total exports.
Gromov believes that almost full suspension of exports to Europe will be eased, particularly, through using indirect swap mechanisms as Russian companies will supply their petroleum products to the domestic markets of other countries, whereas they in their turn will export their fuel.
During the first 2-3 weeks after the embargo’s enforcement Russia may quite sharply reduce refining, though in the second half of the year more than 80% of the lost volumes will recover, he said. "According to optimistic estimates, it will happen as early as by the summer, while pessimistic forecasts project it by the end of 2023," the expert noted.
The decrease in exports will be partially offset by the fact that before the embargo the supplies of Russian fuel rose quite substantially whereas the EU nations tried to stockpile diesel fuel to the full to have time to adjust the logistics, he added.
Russia will be able to maintain the export volumes of petroleum products through increasing deliveries to Asian countries, Gromov explained. For example, Russian fuel oil is already actively used in the refining process in China, while India that has no considerable oil reserves, has gained a possibility to become a large exporter of the fuel through using indirect swap mechanisms, and it actively supplies it to the US, he said.
"The Indians can do the same for the Europeans. While we will be suppling [fuel] to the domestic markets of Asian countries. There are no sanctions violations here, another question is that the refineries’ margins are affect, and Russia’s budget revenues are going down," the expert noted.
He expects Russia to redirect petroleum products in two directions: to India, this being a low-margin option, and the Middle East and Turkey.
Gromov suggests that Russia will hardly be able to keep the current high production levels in 2023: output will drop by 30-35 mln tons according to the pessimistic forecast, and by 25 mln tons according to the optimistic forecast. "Overall, the situation regarding petroleum products will start becoming clear not earlier than in the first quarter of 2023," he said.