One year has passed since the introduction of the EU embargo on Russian petroleum products, the ban on their transportation by sea for companies assigned to the EU, and the introduction of a second price ceiling. This year has demonstrated the low effectiveness of such pressure measures.

The situation on the domestic motor fuel market and the agreements within the framework of OPEC+ had a much greater impact on our petroleum product exports.

The United States made a decision on embargo on the Russian oil and oil products in March, and it came into force in April, 2022. Courage of this decision and speed with which it was accepted, were explained by a number of circumstances. The first is rather low dependence of the USA on the Russian import. Here it would be possible to be indignant, and this indignation would be justified: in 2021 supply of oil and oil products from Russia to the United States, according to Management of power information, reached a historical record — 245,633 million barrels. Russia took the third place among exporters in this market, having slightly conceded to Mexico (259.5 million barrels) in fight for the second place.

But these indicators grew dim against the Canadian deliveries which in the 2021 reached 1584.21 million barrels – 51.2% of all oil import. The Russian oil and oil products are 7.94%.
And yet 7.94% is a lot. But after all it is a share not from cumulative demand but from cumulative import. For comparison, import of oil and oil products in 2021 in the United States made about 8.5 million barrels per day and consumption — about 19.5 million barrels per day. These data not fully describe the situation but adumbrate about the level of dependence of this country on import.
In other words, Washington expected to replace quickly deliveries from Russia. And also to strengthen pressure upon our oil and gas branch — to provoke falling of production and to squeeze out it from the world market with what other producers of oil had to help. It was supposed that as soon as Russia starts reducing production and export deliveries, the dropping-out volumes will be replaced by other players, first of all by Saudi Arabia and the United Arab Emirates.

Under this belief there was let shaky but obvious basis. Russia occupies a big share of the world market. Its distress would allow other players to expand presence and to make up for the benefit missed in the period of a pandemic. That is the United States and their allies assumed that partners in OPEK+ will use position of our country. However partners in OPEK+ did not want to play others game, destroying arrangements which the only held the market from chaos.

The Russian oil and gas industry has demonstrated much greater resilience than its detractors had anticipated. However by that moment as it became obvious to all, the European Union declared embargo. Since December 5, 2022 the ban on import of the Russian oil (taking into account a number of exceptions) was imposed and since February 5, 2023 on import of the Russian oil products. And the situation sharply changed not in favor of the EU and the countries of G7.

It is impossible by sea

Embargo was followed by a ban on use of the western ecosystem of shipping. It accounted for up to 95% of all sea transportation of Russian oil. This meant that as soon as the embargo from the European Union (the main sales market) came into force on December 5, the presence of Russian oil on the world market would begin to decline rapidly. It was supposed that it will be impossible to transport its most part. And the final blow will be struck by a ban on transportation of oil products.

It would seem that G7 and the European Union are trying to achieve this. But they achieved it, expecting that the dropping-out Russian volumes will be replaced by other suppliers, and in the summer of 2022 it became obvious that those are not going to help (have no technical capability). The prospect of a monstrous deficit and a multiple increase in oil prices loomed, from which large buyers obviously had to suffer. On successful combination of circumstances the United States and the European Union were two of three largest buyers of oil in the world. Having dexterously created a problem, the USA and partners rushed to solve it.

So the ceiling was born

The Russian oil is delivered on the foreign markets by pipeline and sea transport. In 2021, according to Bruegel, about 44% of export of our black gold fell to the share of the European Union (29% — the sea, 15% — on the Friendship oil pipeline). For comparison: 30% were the share of China (19% — the sea, 11% — on the ESPO oil pipeline).

More than a half of the oil exported by Russia could disappear from the world market after coming into effect of embargo and a ban on sea transportation already by the beginning of 2023. And it is not less than 2.5% of world demand. It is huge size.

Appear at least a hint on disappearance of such volume, the market would start panicking, preparing for the future accident. And after all it just calmed down in the summer of 2022 when it became clear that Russia after the short period of decrease restored production of oil again.

It was impossible to cancel sanctions of G7 and the European Union for the political reasons. But it was necessary to create certain conditions which would allow Russia to continue using legally the western ecosystem of shipping, having kept its presence in the world market. So there was a ceiling of the prices.

Anonymous sources

If oil is on sale for $60 per barrel or cheaper, for its transportation it is possible to use further services of carriers, insurers, financiers, brokers which are registered in the countries of the so-called Coalition on restriction of the prices of the Russian oil (G7, the European Union and Australia).

At the first stage after introduction of the European embargo and a ceiling of the prices in the world press the Russian oil was begun to be buried hastily. For example, on December 11, 2022 the Bloomberg agency pleased readers with an article «Russia feels pain from the oil embargo of Europe. The world quite managed to cope with an overflow of the Russian oil from Europe to Asia, and it strongly beats across the Kremlin». And in February of 2023 restrictions of the prices on the Russian oil products started working.

A part of wide audience, surprisingly, perceived it literally — the United States and their allies introduced restriction on the Russian oil (and oil products), and now nobody can buy them at higher prices, otherwise, sanctions will follow. However, so strange treatment was supported by numerous messages of world mass media on fear of some country of secondary sanctions and its unwillingness to buy Russian oil at the price above the ceiling. Most often messages went with reference to the authoritative, deserving the highest degree of trust, but thus anonymous sources.
India was particularly hard hit in this regard.

Fight for India

The role of India as the buyer of the Russian oil considerably grew since the beginning of 2022. In the 2021 there were about 4.5 million tons from the Russian Federation (approximately four times less than from the United States). In 2022 this indicator made already 37 million tons. And in the 2023 it exceeded 70 million tons. Supplies of petroleum products from our country also grew to India. Such a prompt take-off did not remain an unnoticed wide wing of ill-wishers. And they began to act. In April, 2023 «sources» of Bloomberg reported that «the largest Indian banks recommended to local oil refineries not to buy the Russian oil at the price over $60 for barrel». This was followed by creative reinterpretations of the very cautious statements of major Indian officials, from which it was also concluded that the ceiling was working and not today, so India would join it tomorrow. Also information on the problems which are allegedly taking place with payment was widely publicized. World mass media reported that the Indian companies pay for the Russian oil in rupees which cannot be converted — «currency collisions undermine trade in oil of Russia with Asia». As befits a good rumor, retold several times with increasing detail, at some point it reached an amazing scale -»well–informed» people authoritatively reported that $40 billion (if you count rupees) had already settled in Indian banks forever. Such statements adjoined to statements that the Indian direction is one of the most profitable for the Russian companies, and local buyers mainly pay off with the currency which is in broad use in Asia and in the Middle East.

And at the beginning of 2024 the same Bloomberg agency reported that «the Russian oil loses competitive advantages in India because of an increase in prices», and provides the schedule according to which our black gold in India is on sale approximately at the level of the Iraqi grades, usually keeping positions much higher than $70 for barrel.

And at the beginning of March the ministry of oil and natural gas of India declared that import of the Russian black gold remains at the last year’s level.
Sensation in mass media, feeding decadent moods, did not affect a real state of affairs in any way.

A share of unknown and «other»

After introduction of a ceiling of prices of oil and oil products it was supposed to reconsider its level once in two months. But this has never been done. But in each performance of the U.S. Treasury Department (responsible for observance of restrictions) the statement sounded that Russia keeps deliveries to the world market and the ceiling of the prices works.
Perhaps he really works, since major officials from the United States are talking about it. The ceiling level is not being reviewed, since they do not see any need for this? The foreign analytical companies try to trace sales and transportation of the Russian energy resources. Among information collected by them there are, for example, data on the country of origin of insurers which work with the tankers transporting the Russian black gold.

Till December, 2022 about 70-80% of these insurers came from the countries of the Coalition on control of the prices (G7 and the European Union). It was impossible to identify the country origin of 15-25% of insurance (depending on a month). Whether it is worth saying that a share of «unknown» for the last year grew? Already to the middle of summer of 2023 the ratio was replaced on opposite — about 70% of all insurance came from the countries which foreign researchers could not identify by origin, and a little more than 28% — from the countries of Europe and G7.

Changes concerned also the countries from which there were owners of tankers. In 2021 50-65% of them were registered in G7, the EU (or Norway which too joined restrictions with an attendance order). Dependence on this region began to decrease even to embargo introduction. From the middle of 2022 its share fell lower than 50% and by December reached 40%. The freshest data belong to July of 2023 when a share of the countries of the Coalition fell approximately to 25%. They were succeeded by ship owners from the United Arab Emirates and the «other», that is poorly identified regions, about two thirds of all transportations of the Russian oil which borrowed to the middle of last year.

We in this case are guided not by official data of our state and on the European research structures (for example, Bruegel) who are interested in that the ceiling worked, and the price of the Russian oil was regulated by Washington and Brussels. And they recognize that our country keeps presence in the market, having reoriented on an alternative ecosystem of shipping.

Similar replacement happened and in the field of the currencies used at trade in the Russian energy resources. If in the field of gas the unfriendly countries are obliged to use the ruble scheme of payment since spring of 2022, concerning the Russian oil and oil products of such restrictions did not exist. And nevertheless by the end of 2023 through Reuters agency the assessment sounded, according to which «less than 10% of the oil extracted in Russia <…> is on sale in dollars and euro». The Chinese Yuan, UAE dirham and Hong Kong dollar became the main currencies. These data are also valuable that they are written by ill-wishers from the countries which tried to impose crushing terms of a ceiling of the prices and to pass to thin control of the Russian deliveries.

From a cudgel to a needle

The United States, by the way, so successfully swung a sanctions cudgel in March-April, 2022 that in the world market there was a terrible panic which led to an increase in prices for oil to long-term maxima. The world did not see so expensive oil since the end of the 2000s. Even more discouraging was a stability of the Russian oil and gas branch and readiness of many countries of the world to continue cooperation with Russia. Against this background, it became clear that it was necessary to act more carefully, otherwise the domestic market of the United States itself could suffer and ordinary voters would begin to be especially violently outraged by too high gasoline prices. Having rejected a cudgel, Washington took a needle in hand and passed to tactics of surgical strikes — sanctions against ship owners who transported the Russian oil. That is additions and toughening to the restrictions introduced earlier.

It is worth specifying that this is not about sanctions simply upon transportation of the Russian black gold. Sanctions are imposed only against those carriers which convicted of violation of «ceiling». They or are registered in the country of the Coalition, or used certain services of the companies from these countries for the purpose of transportation of the Russian oil at the price over $60 for barrel. New sanctions against concrete vessels and ship owners are widely lit in world mass media. Not less willingly they tell how sub-sanctioned vessels worryingly stand and sadly transport nothing. They are less willing to talk about the time, when they resume transportations. However, you should not be engaged in throwing hats at them and to underestimate embargo. There were serious consequences from it, but not that type on which Europe and the USA counted.

Change of streams

Europe for many years was the largest buyer of the Russian oil products. The main of them are vacuum gasoil, naphtha, fuel oil and diesel fuel. Our country makes twice more diesel fuel than consumes therefore in structure of export deliveries this high-marginal product is in the lead.

In January, 2023, before introduction of embargo on export from Russia, according to Vortexa, about 2.8 million barrels per day were sent. In February of the same year this indicator started being reduced, did not reach by the beginning of March 2.4 million barrels per day yet. That was connected not so much with the imposed ban, how many with seasonal decrease in demand. In March export increased to 3 million barrels per day. Then decrease followed. But here it is worth specifying that consumption of oil products in Russia increased. First of all — gasoline and diesel fuel. This growth had first of all seasonal nature. But also in annual expression consumption increased too. The period of planned repairs at oil refinery began.

In combination with embargo these facts played a dirty trick with our domestic market. After introduction of embargo it was required to reconstruct logistics — the stream of oil products which were transported by rail to ports increased. The main loading fell on the northwest direction (Primorsk and Ust-Luga) and also loading in the south grew (Novorossiysk).

Against «gray»

In May the period of holidays began. Consumption of motor fuels began to increase in resort, tourist regions where many citizens of our country went on an individual transport. The considerable part of these regions belongs to the southern direction which appeared extremely, it is possible to tell, abnormally loaded. Because of it terms of transportation of oil products by rail started growing.
Considering a stop on repair of a number of capacities in the southern regions, rhythm of deliveries was broken. Owners of independent networks were periodically compelled to report that any type of fuel is not available. Also they moved off in searches of this fuel in the region that led to a speculative increase in prices in small wholesale. And control of retail prices, usual for our market, the largest federal networks though did well to the simple consumer, but in such conditions reduced marginality of refueling business.

It turned out that on average fuel is available that in scales of the country there is no deficiency, but aggravated problems with logistics resulted in local deficiencies, stories about which were willingly picked up by many mass media. It, in turn, increased uneasiness level in the market and aggravated price crisis.

By the end of summer wholesale prices were much higher than retail. Some buyers of large consignments of fuel preferred to sell it abroad but not to carry on domestic market. The volume of so-called gray export increased.

It was succeeded to overcome price crisis due to seasonal decrease in demand and extraordinary measures of the government — a ban on export of motor fuels. As practice showed, it was directed first of all against «gray» exporters as for large producers of the oil products which were systematically sating domestic market during the entire period of price crisis eases were quickly entered. First of all permission to export was got by the volumes delivered by pipeline transport. «White» export was restored, and «gray» came to naught.

The government periodically should include manual control mode again. At the beginning of March the partial ban on export of petrol came into force. But export of this type of oil products is usually ten times less than export of diesel fuel.

The scale of a March ban is incomparable to what was entered in the fall of last year. And not numerous restrictions which concerned diesel fuel, on the contrary, it was decided to cancel.

Expansion of old roads

Optimization of logistics within the country proceeds meanwhile. The direction of deliveries is expected changed in a year which passed since the beginning of the European embargo on the Russian oil products. If in January, 2023 about 50% of diesel fuel from Russia went to the European Union, in January 2024 comparable volumes went to Africa and the countries which are not entering into the EU (for example, to Turkey).

Considerably in comparison with previous years deliveries to the Middle East and to Latin America increased.
But thus it is impossible to tell that the domestic oil and gas complex opened for itself essentially new foreign markets. Russian companies worked with each of the directions where now there are our oil products, for years, building chains of deliveries. Actually, these years of work also allowed redirecting production to the friendly countries quickly.

Today presence of the Russian oil and products of its processing in the world market restrains only the agreement of OPEK+ and the growing consumption in domestic market which needs to be sated on a priority basis.