The European Union agreed to a partial embargo on oil from Russia. What it means It

took the European Union a month and a half to agree on a partial embargo on oil supplies from RUSSIA. usabanned its purchase back in March.How restrictions can affect Russia and the global oil market - RBC understood

During the summit in Brussels, the European Union reached an agreement on a partial ban on the import of Russian oil as part of the sixth package of sanctions, the HEAD of the European Council, Charles Michel, announced late on Monday, May 30: “An agreement to ban the EXPORT of Russian oil to the EU. This immediately covers more than two-thirds of Russia's oil imports, cutting a huge source of funding."

The ban has been placed on offshore shipments of oil, but excludes exports via pipelines, through which EU members, including Hungary, Germany and Poland, received about a third of the oil. At the same time, the last two countries independently decided to abandon any form of Russian oil supplies (by sea and pipelines), so that by the end of the year it will be sent to the EU only through the southern part of the Druzhba oil pipeline, which accounts for 10% of the total oil volume, bought by the European Union from Russia, explained the head of the European Commission Ursula von der Leyen.

The issue of the oil embargo has been discussed by European countries, one of the largest buyers of Russian oil, since mid-April. But so far they have not been able to reach an agreement: Hungary, which receives 60% of its oil from Russia, opposed it. The United States, which accounted for about 10% of Russian oil exports, refused to purchase as early as March 8.

Last year, the EU countries brought about €32.7 billion worth of crude oil by sea, or 68% of all oil imports from Russia. For another €21.2 billion, Europe imported Russian oil products by sea. These volumes, after transitional periods (for example, Bulgaria received a deferral of the embargo until the end of 2024), will be prohibited from supplying the EU. Pipeline exports of Russian oil (through the Druzhba pipeline to Hungary, Slovakia and the Czech Republic) will also be curtailed, but after a period of time that has not yet been specified by the European Commission. Last year, Hungary, the Czech Republic and Slovakia received €5 billion worth of Russian oil through Druzhba.

What are the consequences for the Russian budget and the global oil market after the introduction of restrictions, RBC understood.

Who buys Russian oil and how much

Last year, EU countries imported Russian crude oil and petroleum products worth €70.8 billion (€48.3 billion and €22.6 billion, respectively). The total import of these products to the EU amounted to €251.6 billion, that is, Russia provided more than 28% of this volume, follows from the Eurostat database.

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The Netherlands imported the most (23% of the total volume of oil and oil products from Russia), which act as a European hub for receiving Russian fuel, Germany (16.6%), Poland (10.6%), France (8%).

In the first quarter of this year, the EU purchased oil and oil products from Russia for €27 billion (an average of €9 billion per month). EU countries last year imported 161.5 million tons of Russian oil and oil products. In the first quarter of this year, this figure amounted to 44.1 million tons.

What does this mean for Russia

Oil and oil products are a key source of export earnings in Russia, accounting for almost 37% of all merchandise exports ($180 billion), according to the Federal Customs Service last year. Natural gas exports are significantly inferior to them - $64 billion over the same period. Last fall, the Ministry of Economic Development predicted that oil and gas exports would bring Russia $251 billion this year (the base version of the forecast).

The United States refused to import Russian oil. What does this mean for the business market

How much the budget depends on oil and gas

In general, oil and gas revenues of the federal budget in 2021 amounted to 9.06 trillion rubles, or about 36% of the total treasury revenues, follows from the data of the Ministry of Finance. Of these, the severance tax on oil brought the budget 6.3 trillion rubles. Another 1 trillion rubles. brought a relatively new tax - AIT from the extraction of hydrocarbon raw materials (takes into account the profitability of a particular project; it is impossible to accurately allocate AIT in relation to oil). Export duties on crude oil provided the budget with another 708 billion rubles, and on petroleum products - 391 billion rubles. Thus, only from oil and products of its processing the federal budget received up to 8 trillion rubles. in 2021.

Oil and gas revenues of the budget depend on the export of oil and oil products non-linearly. Only export duties directly depend on export volumes, which in 2021 accounted for only 12% of all oil and gas revenues (1.1 trillion rubles). The Ministry of Finance takes into account the price of oil in export duties, monthly recalculating the amount of duties based on monitoring the prices of Russian Urals oil.

The MET as a tax base takes into account the volume of oil production, which in general can be reduced by 17% in 2022 if European countries refuse it, Finance Minister Anton Siluanov said at the end of April. In addition, the ruble receipts of the MET and export duties to the budget depend on the DOLLAR exchange rate against the ruble (the higher it is, the greater these receipts; as of May 31, it is 61.2 rubles per dollar). Finally, there is also a reverse excise tax on crude oil: the budget pays oil refiners at its high export prices, thereby subsidizing domestic fuel prices. This reimbursement (which cost the treasury almost RUB 1.3 trillion in 2021) should be deducted from oil and gas revenues.

According to US foreign trade statistics, last year the US imported $17.6 billion worth of Russian oil and petroleum products. Russia's losses due to the EU-agreed partial embargo on its oil will amount to about $22 billion a year, BLOOMBERG calculated (does not take into account the supply of oil products, which are also embargoed): about $10 billion due to a ban on sea exports and another $12 billion from termination of supplies via the northern branch of the main gas pipeline of the Druzhba oil pipeline to Poland and Germany. At the same time, Russia will continue to earn about $6 billion from exports to Hungary, Slovakia and the Czech Republic through the southern branches of Druzhba.

Based on the forecast of the head of the European Commission, after the embargo on sea supplies comes into full force and taking into account the voluntary plans of Germany and Poland to refuse to purchase Russian oil through the northern part of the Druzhba oil pipeline, this will affect 90% of oil supplies from Russia, that is, €63.72 billion ($68.18 billion) out of €70.8 billion per year. Taking into account losses due to the US embargo, it will miss $85.8 billion, or 48% of revenues from oil and petroleum products exports, and as a result will be forced to reorient to the Asian market, where oil is already sold at a discount, about $34 cheaper than oil futures. Brent brand, writes Bloomberg.

Against the backdrop of discussions on the oil embargo in Europe, Leonid Fedun, co-owner and vice president of Russia's largest private oil company LUKOIL, proposed to reduce Russian production by 20-30%, to 7-8 million barrels. per day. “Why does Russia need to provide production of 10 million barrels. oil per day? If we can effectively consume and export 7-8 million without losses to the state budget, domestic consumption and imports,” he wrote in an article for RBC “The New Paradigm of the Russian Oil Industry”. “Should we try to maintain pre-crisis export volumes by agreeing to 30% and sometimes even 40% discounts?” Fedun noted. In his opinion, buyers under the talk of an oil embargo will try to "institutionalize" these discounts with the help of tariff regulation tools.

Leonid Fedun New paradigm of the Russian oil industry Opinion

What does this mean for Europe

Russia is one of the world's largest producers and exporters of oil and petroleum products (along with Saudi Arabia and the United States). Its market share is about 10%. According to the International Energy Agency, in January, Russian companies produced a total of 11.3 million barrels. oil per day, including 10 million barrels. crude oil, 960 thousand barrels gas condensate and 340 thousand barrels. NGL.

Oil exports from Russia in December amounted to 7.85 million barrels. per day, of which crude oil and condensate accounted for 5 million barrels, oil products - 2.85 million barrels. About 60% of Russian oil exports went to the countries of the Organization for Economic Cooperation and Development in Europe (OECD, mainly EU members), 20% to CHINA . In November (the last month with available statistics), OECD countries in Europe imported 4.5 million barrels. per day from Russia. including 3.1 million barrels. crude oil and 1.3 million barrels. oil products. Russian companies accounted for 34% of all imports from these countries.

According to Bloomberg, last year Russia supplied about 720 thousand barrels. oil per day to European refineries via the Druzhba pipeline. The bulk of the raw materials went through it to Germany and Poland, which decided to refuse exports from Russia, regardless of the decision of the EU. Another 1.57 million barrels. per day (75% of all export deliveries) were sent to the EU by sea.

Putin called the tasks of the oil industry against the backdrop of the "economic auto-da-fé" EU Economics

President Vladimir Putin , speaking about the intentions of the EU to impose an oil embargo, said that Europe is trying to blame Russia for its mistakes in energy policy. However, as a result of the "chaotic actions" of European countries, their economies are being damaged, while the revenues of the Russian oil and gas sector are growing, he said.

Amid preparations for an oil embargo in the United States, oil prices rose to $138 per barrel in early March, but then began to decline. After the announcement of a partial embargo in the EU, oil rose to $124 per barrel for the first time since March.

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