BAKU, Azerbaijan, May 6. An EU ban on oil imports from Russia will lead to a large-scale reorientation of trade flows, with volumes swinging from West to East, Trend reports with reference to Fitch Solutions.
Currently, Russia exports more than 7mn b/d of crude oil, condensates and refined fuels; the bulk of this (approximately 4.5mn b/d) flows to Europe. Trade flows have already begun to shift, but delinking the EU and Russian energy systems in full will be an uphill struggle, given the deep interdependencies that exist between the two.
“In theory, the volumes currently imported by European buyers can be sent elsewhere, largely to Asia. EU imports from Russia would then be replaced by additional cargoes from other regions, such as the Middle East. In practice, though, this is far from straightforward. For one thing, oil is not entirely fungible. Refineries are designed to intake a certain type of crude, and deviating from this will impact on operational performance and product yield. Europe’s refining sector was developed to process Russia’s sour Urals grade, but many of the facilities in emerging markets in Asia lack the complexity to handle crude of this kind,” Fitch Solutions said in its latest report.
The company believes that the EU’s embargo will have a negative
impact on Russian trade data in 2022 as oil exports to the EU
accounted
for approximately 19.6 percent of Russia’s total exports in January
2022.
“Typically, more than 50 percent of Russian refined and crude oil is exported to Europe while refined and crude oil have made up an average 45.9 percent of Russia's total merchandise exports since 2000. Therefore, we have revised down our export forecasts for 2022 from -15 percent to -25 percent. We are in the process of also adjusting our 2023 trade outlook for Russia. This said, our headline real GDP forecast for Russia remains unchanged at -12.5 percent,” reads the report.
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