How the EU Ban Will Impact Moscow’s Exports Elsewhere
- The EU’s upcoming ban on Russian oil will likely complicate Moscow’s exports.
- Because Russia will likely lean more on Asia to export its oil, this means that there will be longer trade routes.
- Here’s what the EU embargo entails – and how it will impact Russian oil exports elsewhere.
The European Union’s ban on Russian seaborne crude is just two weeks away – and it’s set to complicate Moscow’s energy exports.
Russia was already under embargo. divert more shipmentsTo make up for the imminent loss of Europe’s largest buyer, Asia, it sent its staff to Asia.
This could lead to disruptions in shipping routes that are longer and squeeze on tanker demand. It also means higher crude and freight costs and increased freight costs. Russia has been forced to find shorter routes via Arctic Circle in order to ship oil to Asia because of these risks.
The ban, which is intended to punish Moscow for its invasion and occupation of Ukraine, will be in effect from December 5. It will prevent EU tankers transporting, financing, and insuring Russian oil cargoes. This means that deliveries to India could take up to 10 times as long.
Here’s how the EU embargo could have an impact on Russian oil exports.
Russia turns to Asia
Moscow has been trying to find other buyers for its crude oil shipments to northern Europe. fell by 92%In the four weeks preceding November 18, signals have been made that continental importers are already reducing their dependence upon Russian oil.
To make up for the lost demand Russia is now exportingRecord volumes were exported to Asian countries, including India and China. India’s top crude oil supplier has been surpassed by Saudi Arabia and Iraq. China’s energy exports grew 22% in September.
“One thing we can be almost certain about is that Russia’s pivot toward Asia will become more and greater evident,” Viktor Katona, an Insider analyst at Kpler, told Insider.
“Once Russia is no longer allowed to transport its crude oil into Europe (exports into northwestern Europe are already tangible), the Asia-bound flows won’t stop growing,” he said.
Longer shipping routes
Russia’s increasing dependence on Asian buyers requires a rebalancing of shipping dynamics. Oil cargoes headed to India or China must travel thousands more miles than the regular voyage to Europe.
“With more Asian crude and products discharges, the average voyage length will undoubtedly increase.” Katona said that while a Russia Baltic to Rotterdam voyage took about 6-7 days; a trip from the same Russian port into India would take between 35-40 days.
This means that Russia will have to deal with a greater demand for long-range tankers.
“It could easily go five to six times the distance, which means that you will need much more ships in order to transport the same volume as you imported previously,” Anders Redigh Karlsen of Kepler Cheuvreux, a Kepler analyst, told Bloomberg. “That will drive demand for product tanksers.”
Freight rates are rising as a result of tighter tanker demand. Bloomberg reportedThe shipping industry’s benchmark trade route saw earnings surpass $100,000 one day earlier this week, which is the highest level since early 2020.
Russia has been looking for shorter shipping routes to Asia because of these challenges. This week, President Vladimir Putin spoke out about Russia’s “Arctic power” by launching two nuclear-powered Icebreakers that will help trade with Asia.
It sent an icebreaker oil tanker to China via the Arctic Circle just this month. This is the shortest route between Europe & east Asia.
This is a pivotal moment for oil markets with OPEC+ reportedly mulls a crude output increase of 500,000 barrels. However, Saudi Arabia has denied the claim.
Over the past five months, crude oil prices have fallen due to recession fears and China’s COVID-19 policies. Despite OPEC+ reducing production in a bid support prices, this has happened. Since mid-October, when the oil group announced the announcement, Brent crudeThe decline was approximately 9%
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