It is impossible to throw out such a volume of goods from the market without harming buyers, that is, oneself. The initiators of the sanctions were well aware of this, therefore Russian oil was banned only in the European Union and the G7, while in other countries they tried to limit its cost by introducing a maximum price mechanism (now for Russian oil it is of $60 per barrel). The United States tried to negotiate with Iran about lifting sanctions, but nothing happened. Sanctions were partially lifted from Venezuela, but so far this has not given the desired result, production in the country is not growing.
International oil trade, according to OPEC, is about 42-43 million barrels per day. In January, Russia exported about 5.1 million barrels per day, Iran – 1.8 million barrels, Venezuela – 0.6 million barrels per day. In addition, as Kirill Rodionov, an expert at the Institute for the Development of Complex Fuel and Energy Technologies, points out, in April 2018, that is, before the sanctions announced by Donald Trump, Iran supplied 2.6 million barrels of oil per day to the world. market. For comparison, oil demand in Germany, the largest energy-consuming country in Europe, was just over 2 million barrels per day in 2021. By April 2019, Iranian oil exports fell to 0.4 million barrels a day, but then supplies began to grow. A similar export dynamic was typical of Venezuela.
All sanctioned oil, not just Russian oil, is traded at a discount, regardless of whether a maximum price is applied to it. Iran and Venezuela sell their oil to China and India also at a discount. Russian oil was sold at a discount to these countries long before a price ceiling and an EU embargo on their imports were introduced. As a rule, this is a payment for more expensive logistics and insurance.
Until now, only Iran and Venezuela were involved, the share of such trade in the world was small. But with the classification of Russian raw materials as “impaired” goods, the volume of transactions with oil, the price of which is significantly lower than market quotations, has tripled. In fact, this is now one in six international oil purchases.
Since the main volume of world oil trade falls on several buyers: the United States, the European Union, China and India, it turns out that the market is divided into two parts: cheap and expensive raw materials. Countries that did not support Western sanctions meet more than half of their oil needs at prices significantly lower than those of the US or the EU.
Photo: Infographic “RG” / Leonid Kuleshov / Sergey Tikhonov
Valery Andrianov, associate professor at the Financial University of the Government of the Russian Federation, an expert at the InfoTEK Analytical Center, notes that the world oil market is divided into two parts. The first of these is the traditional Western market (yesterday it claimed to be global), which is characterized by high volatility, the presence of an important speculative component and the powerful influence of political factors.
The second segment, which is being formed today, will include the main developing economies of the Asia-Pacific Region (APR) and other regions of the planet, acting as buyers, and the largest producers of hydrocarbon raw materials, many of which are already are under Western sanctions (Russia, Iran, Venezuela). ). In this market, fair equilibrium prices will operate, set on the basis of a balance of supply and demand, satisfying the seller and the buyer, and also devoid of a speculative component and political risk premiums. Due to these factors, prices in this segment will be lower than in the western sector of the fragmented market, Andrianov believes.
Every sixth international agreement for the purchase of oil is concluded at a discount, the world is divided into two markets: cheap and expensive oil.
Cheap energy resources mean low inflation, industrial and business development, and economic growth. Expensive energy resources mean rising prices, emigration of industrial firms, and stagnation. Now cheap energy resources are received by countries that have already shown record economic growth in the last two decades, while expensive ones remain for countries, albeit rich, but whose economy has grown below the world average.
According to Andrianov, the fragmentation of the market means not only and not so much the division of commodity flows in the West and the East, but the formation of new independent instruments of the will of the EU and the US to ensure the oil and gas operations. markets. The West is losing control over the global energy market. Hence its recent actions related to the establishment of maximum prices. On the one hand, it is an attempt to move from indirect to direct methods of market management. On the other hand, the price cap for the same oil is an attempt to stop the formation of an independent eastern segment of the market with its low prices and redirect the flow of raw materials into the gray zone. The price ceiling implies that the West will turn a blind eye to the source of the oil if it is Western countries with low “ceiling” prices.
Oil prices will rise due to sanctions. According to Rodionov, the sanctions reduce the supply on the world market, which partly contributes to increasing prices. This was especially noticeable in 2018, when sanctions on Iran became one of the main reasons for the increase in the cost of Brent. According to the expert, in the long term, the determining factor for the market is the growth of production in countries not affected by sanctions. For example, in Guyana, a South American country, where in the last year production increased from 120,000 barrels per day to 350,000 barrels, and by 2027 it should reach 1 million barrels per day. True, all non-sanctioned countries that can seriously increase oil production do not belong to the circle of EU or US countries, so it is not possible to exclude them from sanctions either.