Punishment Russia begins to act: the Kremlin has been throwing threats, now it says that there are no problems
A liter of fuel now costs significantly more than it did before Russia started the war in Ukraine, but not 2 euros each, as it was in the summer. New shocks in the oil market on Monday.
“We protect our dissociation from Russian oil and its products with these decisions. I think this is a historic moment,” LNK for the sake of of the European Commission Head of the (EC) representative office in Lithuania Marius Vasčega.
It is forbidden to ship Russian oil to the European Union (EU). A major impact on Europe is not expected.
“Well, that’s up to 10 percent of all crude oil imports into Europe.” It’s not much anymore, maybe it’s not a big problem anymore, because there are those alternatives”, said the SEB bank economist. Tadas Povilauskas.
Another sanction came into force on Monday – the 7 largest economies of the world and Australia agreed that the Russians will be paid no more than 60 per barrel for oil.
“This is a very effective measure, which is why Russia’s reaction to this ceiling was relatively strong,” LNK said.Orlen LithuaniaRičardas Morkvėnas, head of sales and development.
Lithuania called for the introduction of much lower price ceilings.
“Whether the EU together with the G-7 countries and Australia will be effective enough, and this is the permissible price of Russian oil significantly reduced by the Kremlin regime to finance military aggression against Ukraine, became clear after some time,” the president relayed this comment to LNK. Gitanas Nausėda.
For example, on Monday, Russians voluntarily sell oil at a price similar to the ceiling imposed by the West – 64 dollars per barrel. But the Russians will no longer be able to dictate prices.
“The same China, India and other countries would obviously have to negotiate a lower price to suffer.” Russia. But the issue is political. Will Russia sell for that lower price”, considered economist T. Povilauskas.
Threats were thrown at the Russians so that there would be no price ceiling for their oil. Now they say no problem.
“Russian economy has the necessary potential to fully meet all requirements for a military operation. Such measures will not affect us”, assured the representative of the Russian president Dmitry Peskov.
However, the biggest shocks in the fuel market are yet to come after the New Year. In January, Russian oil will no longer be able to reach Europe via pipelines.
“This will be a strong enough shock for the whole of Europe, because it will be necessary to replace the oil received by pipelines – about 75 percent of the oil with some kind of supply from the sea, which is not very easy to do,” said the head of sales and development of Orlen Lietuva.
Europe’s ability to get more oil by ship could be hampered by China. The Chinese seem to be abandoning their still very strict COVID-19 restrictions. Chinese industry can shoot further. And they will need a lot of oil.
“If China really loosens the restraints of the COVID-19 pandemic and increases consumption in that country, then yes, it will immediately raise both fuel and oil prices,” said R. Morkvėnas, head of sales at Orlen Lietuva.
Another and perhaps the biggest challenge awaits Europe in February.
“Diesel will have exceptional dynamics just because of its lack,” said R. Morkvėnas.
From February, it will be prohibited to supply already produced fuel from Russia to Europe. Europe still buys large quantities of diesel from Russia. In some months, even more than before the war.
“What will happen to diesel prices in February, March of next year – here is also such a strong source of anxiety,” said economist T. Povilauskas.
“Orlen Lietuva” assures that there will be no shortage of diesel in Lithuania. Other EU countries may also have a deficit.
“Europe does not have enough capacity to produce the required amount of diesel, it is dependent on imports. The sellers will dictate the price, because there will be a shortage in the market”, predicted the head of sales and development of Orlen Lietuva.
According to the EC, Europe was ready to postpone the entry into force of the sanctions for half a year.
“There was enough time to adapt. And the shortcomings of the EU are definitely to be faced”, M. Vašcega, head of the EC representation in Lithuania, told LNK.
The EU is preparing a new package of sanctions against Russia and Belarus – the ninth.
View the entire LNK report here: