Russian oil begins to feel the pressure of Western sanctions
The US ramped up its sanctions against a wide range of tankers carrying Russian oil in October 2023. Dozens of sanctioned tankers have been idle since then.
Source: Bloomberg
Details: Bloomberg said that the Russian oil industry "is finally getting snarled by sanctions". All Indian refiners have been rejecting state-run Sovkomflot tankers, it reported, with dozens of sanctioned vessels unable to load cargos.
As a result, the Russian oil exporting machine, which has so far funded the war in Ukraine, is finally suffering losses.
Though a sharp decrease in supplies is not expected at this stage, the question is how far Western regulators will go in tightening their squeeze on Russia while oil prices are approaching US$90 per barrel.
Meanwhile, delivery costs for Russian oil are large. It costs about US$14.50 a barrel to deliver a cargo from the Baltic Sea to China, Argus Media found, with over half that amount attributable to sanctions.
Ukrainian drone attacks on Russian oil refineries are further undermining Russia’s profits. Earlier reports suggested that Russian oil refining capacity has diminished by about 600,000 barrels per day as a result of Ukrainian drone strikes on Russian refineries.
Background:
- Russian Telegram channels reported explosions and a fire at the Kuibyshev oil refinery in Russia’s Samara Oblast on the night of 22-23 March.
- UK Defence Intelligence has analysed Russia's attempts to protect its oil refining facilities from Ukrainian strikes, saying it is unlikely that Russia will be able to protect all vulnerable facilities, given the size and scale of its energy industry.
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