Elena Kovalenko12:24, 01/30/23

Russia has forever lost access to the European energy market.

Russia spent nearly 50 years building up its energy market in Europe, but by launching a war against Ukraine, the aggressor’s president, Vladimir Putin , destroyed it in less than 50 weeks.

As the Bloomberg article says , it will be almost impossible to find a replacement for the energy market.

“While Russia has found alternative markets for its crude oil, mainly in India, the transition to selling petroleum products and natural gas will take years and be hugely costly. It is, if at all, possible to create markets when the world turns away from fossil fuels,” – says the material.

When Moscow’s troops invaded Ukraine on February 24, its European energy consumers were frightened. A market that used to absorb nearly 2.5 million barrels of oil per day, another 1 million barrels of petroleum products and 155 billion cubic meters of natural gas per year has all but disappeared.

Crude oil flows from Russia to Europe began to decline soon after Putin’s troops crossed the border. By December 5, when the European Union’s ban on offshore imports of Russian oil went into effect, they were already on the brink, with Bulgaria the only remaining market, which secured a temporary exemption. The flow of oil products is moving along the same trajectory ahead of similar sanctions that come into force on February 5.

Russia’s European natural gas market is also lost. The vast network of gas fields and pipelines built at hundreds of billions of dollars since the first gas crossed the border into Austria in 1968 has been thrown out.

In 2017, it was estimated that $100 billion had already been invested in developing gas reserves in the Russian Yamal Peninsula, much of which is linked to Europe by pipelines, including those under the Baltic Sea that link Russia to Germany. This figure is expected to double by 2025. Now most of these investments look redundant.

While Russia may be able to salvage some kind of energy relationship with Europe after the end of the war, which will inevitably happen, it is unlikely that EU countries will ever afford or need the same dependence on Russian gas as they did before the war in Ukraine.

Russian oil companies have been able to divert supplies of crude oil that traditional European buyers have shunned, thanks in large part to Indian refiners’ hunger for cheap crude. But such a distraction has cost Russia and its oil industry dearly. To penetrate the Indian market, large discounts were required, apparently as high as $35 a barrel, equivalent to a 40% price cut.

By the end of last year, Russian barrels accounted for about a quarter of India’s oil imports, displacing cargo from the subcontinent’s traditional Middle Eastern suppliers Saudi Arabia, Iraq, the United Arab Emirates and Kuwait.

The war in Ukraine and the oil situation:

On December 3, 2022, the EU Council  decided to set the ceiling price for oil exported from Russia at $60 per barrel.

On December 5, 2022,  EU oil sanctions against Russia came into force . The price ceiling means that from December 5, 27 EU countries, the UK, the US, Canada, Japan and Australia will provide services related to Russian tanker oil only if it was purchased at or below the established ceiling price.

From February 5, 2023, the purchase of Russian oil products will be prohibited.

Russia is considering the possibility  of reducing oil production  as one of the measures in response to the decision of Western countries to impose a ceiling on oil prices.

The aggressor country announced plans to reduce the impact of the embargo by  increasing the export of crude oil .

(C)UNIAN 2023