With the Russian invasion in Ukraine, the federal republican country is facing a lot of economic crisis and numerous companies and brands are boycotting Russia. The major escalation in the Russia-Ukrainian war which initially took start in 2014 and has now given rise to a full-fledged war between the two countries. The United Nations General Assembly passed a resolution castigating the invasion and insisted on a full withdrawal of Russian forces. The International Court of Justice commanded Russia to suspend military operations and the Council of Europe dismissed Russia.
Many countries imposed sanctions on Russia, which have affected the economies of Russia and the world, and on the other hand it provided Ukraine with humanitarian and military aid. The European Union adopted a sixth package of sanctions. And as part of the sixth package of sanctions since Russia’s invasion of Ukraine, the European Union member states on May30th reached a consensus to ban 90 percent of Russian crude oil imports by the end of this year. The sanctions include that it will ban seaborne imports of Russian crude oil as of December 5th, 2022, and ban petroleum product imports as of February 5th, 2023.
The European Union member states like Hungary, Slovakia, and the Czech Republic which depend on the imports via the Druzhba Pipeline have all compromised their exemption from the Pipeline imports of crude oil and petroleum products. The sanctions will permit Bulgaria to continue imports until the end of 2024 and will let Croatia import Russian vacuum gas oil until the end of 2023. Till last year, Russia was responsible for exporting about 3.1 million barrels of crude oil, natural gas liquids, and refinery feedstock to Europe per day, and about 1.3 million barrels of diesel and other petroleum products.
Now, the question arises that can Europe cope without Russian oil? The answer is quite comprehensive. In the past few months, Europe has started to import more oil from countries like the United States, West Africa, and the Middle East. And the drop in Russian exports is quite a loss for them and since then it has been lower than expected. However, as more oil and gas majors and commodity traders have stopped lifting Russian cargoes, the country has been able to sell more volumes to Asia, particularly in India.
There has also been doubts about the amount of oil India and China are willing to take from Russia. India has bought large amounts of heavily discounted oil from Russia in recent months – from 600,000 to 800,000 billion dollars, whereas before this year it hardly bought any Russian crude. The stock prices of the Russian oil companies like Rosneft and Lukoil fell vigorously by 9 percent and 7 percent respectively, and it happened just after the announcement of the EU ban. This ban can easily cost Russia 10 billion dollars a year roughly. Russia expressed their confidence by saying that they would be able to find alternative routes for its oil that will no longer be purchased by Europe on account of the embargo. Now how far this is achievable is a questionable matter.
Now, the main reason for worry for the Russians is whether EU sanctions will force Russia out of the oil market or simply redirect it to other regions. Although it hasn’t been a complete doomsday for Russia. The International Energy Agency evaluated that in the first four months of this year, Russia’s oil export earnings rose by 50 percent over the previous year, with crude oil and products initiating about $20 billion per month.
Thus, Russia needs to negotiate efficiently to get its place back in the oil market, or they are yet to face more economic loss.
