The US has declared an embargo on the purchases of Russian oil and petroleum products, for the first time directly banning Russia’s chief export. Britain is planning to stop importing Russian oil by the end of the year. The largest UK-based players, Shell and BP, have already announced their intention to stop buying Russian oil and gradually decrease gas purchases. While oil deliveries to these countries constitute less than 14% of Russia’s export of oil and petroleum products, the EU has not joined the embargo, so such measures may increase pressure on market players forcing them to avoid the purchases of Russian oil.
Shell’s closure of its fuel stations will hardly cause any perceptible consequences for the Russian retail market, according to Anna Lishnevetskaya of Petromarket. The majority of them are in the Moscow Region and even there their share in total fuel sales is about 5%. These volumes will easily be replaced by large Russian competitors and while the regulator is restricting fuel prices, a price hike is also not expected, according to the expert.
Shell, being the largest portfolio player on the LNG market, has contracts for almost 32 mln tonnes with mostly Asian consumers with some agreements expiring as early as 2023, Ekaterina Kolbikova of Vygon Consulting says. According to her, instead of seeking to replace Russian volumes, Shell can decrease the volume of its own export obligations.
Shell leaving the Russian market will inevitably cause significant write-offs and a loss of a substantial share of Russian business for the company while Russian companies lose a major financial and technological investor, Karen Dashyan of Advance Capital thinks. It is obvious that this solution is not in the material sphere, he says. "Essentially, Shell is the last of Western oil and gas major players to shut the door and exit the Russian market."
Record high prices for energy supplies threw cold water on European politicians’ scheme of rejecting Russian resources. After the US announced its decision to stop importing fuel from Russia, the EU’s top diplomat Josep Borrell stated that Europe wouldn’t join the embargo. Earlier, when the price of April gas futures had fully approached $4,000 per 1,000 cubic meters, German Chancellor Olaf Scholz said it was not possible to guarantee Europe’s energy security without Russian supplies at the moment. Meanwhile, Russian Deputy Prime Minister Alexander Novak said that if the Russian deliveries are rejected, oil prices may skyrocket to $300 per barrel. The high-ranking official also stressed that Moscow reserves its right to stop Nord Stream 1. In this case, the world would face a global economic crisis combined with a European recession and disintegration of the continent-wide bloc, experts think.
In the midst of these verbal interventions, Europe is already shelling out an enormous sum of money for gas, Stanislav Mitrakhovich, a senior expert at Russia’s National Energy Security Fund noted. "Russia receives about 700 mln euro daily for gas deliveries," he pointed out. Meanwhile, with current oil prices, an almost complete shutdown of Europe’s gas-dependent industries (chemical, fertilizer production, cement and metallurgic plants) is possible as well as a switch to coal and liquid oil fuel, according to Kirill Melnikov, Director General of the Center for Energy Science. "This will have dramatic consequences for Europe’s industry and will possibly trigger an economic recession in the EU," he says.
In the event of a direct ban on oil and gas purchases from Russia, the energy crisis in the EU would reach a critical stage, according to Rustam Tankayev, Director General of InfoTEK-Terminal. "Energy supplies to households and industrial enterprises would stop, a global economic crisis will break out with its main victims being the EU as well as the US Federal Reserve system," the expert said. He did not rule out that this situation may lead to Europe’s energy starvation and disintegration.
Russian politicians and officials are trying to determine how severe should the reaction be to foreign companies’ decision to halt or suspend their operations in Russia during the special military operation in Ukraine.
On March 4, First Deputy Prime Minister Andrey Belousov said that the Russian government offered three avenues of interaction to foreign business.
The first option is that the company fully continues to function in Russia, fulfilling its obligations to its employees while receiving raw materials and components. In the second scenario, foreign shareholders transfer their share under the management of Russian partners and may return to the market later. The third choice involves halting operations in Russia, shutting down production and firing employees. In this case, a simplified bankruptcy procedure will be applied to the company. In Belousov’s opinion, these actions will help maintain employment and social well-being so that conscientious entrepreneurs can ensure effective business.
Western companies exiting the Russian market will increase unemployment yet it won’t be a particular shock to the labor market, according to RANEPA’s Vladimir Klimanov. He reiterated that about 250 organizations announced that they were halting or suspending business in Russia. It is difficult to estimate the number of employees impacted but it is likely that there are about 200,000-300,000 workers in the risk zone. While this is rather a lot, the expert notes that this is slightly over 6% of the total number of officially registered jobless during the peak of the coronavirus crisis. Additionally, the blow may be softened by the replacement of the Western companies’ market share with Russian ones. If nationalization does occur, many factories that do not require highly-select expertise, such as in the food products sphere, won’t stop operations - they will continue production under a different brand, the expert added.
Concerns repeatedly voiced by Russian specialists, including from the Russian Defense Ministry, that questionable scientific research is taking place in Ukraine under the current Kiev regime have been corroborated with documented evidence.
The documents indicate that not only was Ukraine working on a so-called dirty nuclear bomb, but it was also providing its territory for secret US military biological experiments. Following the launch of Russia’s special military operation in Ukraine, the Americans rapidly shut down their operation of dozens of laboratories there. Yet, they did not manage to eliminate all of the evidence of this research.
Igor Kirillov, who heads the Russian army’s radiation, chemical and biological protection force, went into detail about the US military biological research in Ukraine. Above all, he stressed that the Russian Defense Ministry had repeatedly noted the military biological programs implemented by the Pentagon on post-Soviet territory. Particularly, a network was formed on Ukrainian soil consisting of over 30 biological labs, including research and sanitary-epidemiological ones.
According to him, the directorate of the radiation, chemical and biological protection force of the Russian Armed Forces is constantly studying the biological situation in Ukraine. According to Russian military specialists, an emergency shutdown of the biological programs is underway there.
On March 7, the third round of talks between the Russian and Ukrainian delegations was held in Belarus. During the meeting, the sides planned to discuss political and humanitarian aspects as well as a military settlement of the conflict. However, discussing and agreeing does not necessarily mean implementing the promises as the previous two rounds of talks have shown. Vladimir Medinsky, who is leading Russia’s delegation, said that the talks did not meet Moscow’s expectations.
Many do not believe that dialogue between Moscow and Kiev is useful. Even before the first round of negotiations, political analyst Rostislav Ishchenko told the newspaper that the Ukrainian side needs them in order to agree upon a ceasefire and then buy time to regroup and gear up for another military operation. That said, the expert noted that the negotiations are still needed in order to understand the attitude of Moscow’s adversaries.
On Monday, Colonel General Mikhail Mizintsev, head of the Russian National Center for Defense Management said that in fact Ukraine had not implemented a single condition. "The official response from the Ukrainian side was received only today at 7:10 with the consent to open humanitarian corridors [planned for 10 am] yet at the same time the Kiev regime intentionally did not indicate open humanitarian corridors in the direction of Russia from Kiev, Kharkov, Mariupol and Sumy in the agreement," he noted.
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