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The European Union’s proposed phased embargo of Russian oil, as part of a new round of sanctions against Moscow for its invasion of Ukraine, means Russia will inevitably look to Asia, one analyst said on Wednesday.
The EU proposed its toughest sanctions yet against Russia on Wednesday, including a phased oil embargo, as Kyiv said Moscow was intensifying an offensive in eastern Ukraine and close Russian ally Belarus announced large-scale army drills.
Livia Gallarati, Senior Oil Markets Analyst at Energy Aspects, a global energy research company based in Canary Wharf, said Russian oil production is already decreasing.
Energy Aspect believes there has been a drop from around 11 million before the start of the conflict, to around 9.7 million barrels produced in Russia per day.
“And we think it’s going to come down further, particularly as the sort of the fourth package of European sanctions comes into effect with the wind down period ending on 15th May. We think flows of oil out of Russia will decrease significantly and that will obviously have an impact on production as well as sort of refining activity in Russia,” Gallarati said.
Envoys from European Union countries did not reach an agreement on Wednesday about the proposed embargo against Russian oil, but they were expected to move closer to a deal at a meeting on Thursday, an official familiar with the talks told Reuters.
As Russia looks for where to export, Gallarati believes Asia will seize the opportunity.
“We’ve seen already a significant redirection of flows away from Europe into several Asian countries, particularly India has been taking a lot of Russian oil, a lot more than it usually does. We’re now seeing China also showing some interest in increasing purchases of Russian oil,” she said.
The EU faces the task of finding alternatives when energy prices have surged as it imports some 3.5 million barrels of Russian oil and oil products every day and also depends on Moscow’s gas supplies.
Europe’s reliance on Russian energy is so high that you cannot easily wean off of it without having a significant economic impact in the region,” she said.
Piling pressure on Russia’s already battered $1.8 trillion economy, Brussels proposed phasing out imports of Russian crude oil within six months and refined products by the end of this year.
The plan, if agreed by all 27 EU governments, would follow US and British oil bans and be a watershed for the world’s largest trading bloc, which remains dependent on Russian energy and must find alternative supplies.
