Europeans have increased purchases of Russian oil after the embargo

After the imposition of an embargo on the import of Russian oil and oil products, the EU countries increased their purchases of this raw material from RUSSIA. Italy was especially distinguished, increasing imports by 20% in June against May,

European countries in June 2022 increased the import of crude oil and oil products from Russia compared to May, after the EU governments imposed an embargo on Russian oil , which will fully enter into force by early 2023.

According to preliminary Eurostat data received on August 9-10 and studied by RBC, the EU countries imported in June 0.4% more than in May, Russian crude oil in physical terms (about 7.3 million tons). Imports of oil products from Russia in June increased by 9.7% compared to the previous month, to 2.65 million tons.

The total import of Russian oil and oil products to the EU countries in June increased by 2.7% compared to May in physical terms, follows from Eurostat data.

However, in general, the supply of Russian hydrocarbons to Europe declined with the start of a special military operation in Ukraine against the backdrop of official sanctions and the phenomenon of “self-sanctioning” (voluntary reduction of trade and economic ties) by European counterparties. In June 2022, oil imports from Russia to the EU countries were 7% lower than in June last year, and imports of petroleum products were 24% lower.

In 2021, Russian companies accounted for 27% of EU imported oil, while European refineries are mainly adapted for Urals high-sulfur oil - it will be difficult for them to find alternative suppliers in such a short time, Pavel Verevkin, an investment strategist at Alor Broker, told RBC. According to him, an increase in purchases immediately after the embargo was announced is a natural process.

Record cash flows

In monetary terms, due to high world oil prices, Russian exporters earned more than €7.23 billion from the sale of oil and petroleum products to the EU in June, more than in May (€6.01 billion) or April (€6.72 billion) , and almost one and a half times more than in June 2021 (€4.89 billion).

At the end of May, the EU countries agreed to impose an embargo on sea imports of Russian oil and oil products, and on June 3 they formally approved this decision, which entered into force immediately. However, a transitional period was established: until the beginning of December 2022, “one-time” transactions on the spot market for imports or purchases of Russian oil are allowed as part of the execution of contracts concluded before June 4; for oil products, similar transactions are possible until the beginning of February 2023. The design of the ban has drawn criticism from a number of Western experts who say Europe continues to fund military action in Ukraine. “The decision to exclude energy carriers from the scope of sanctions against Russia has created a monster. Typically, Russia's current account averages around zero during the summer months as warmer weather in Europe lowers oil and gas consumption.

The Bank of Russia reported on August 9 that the current account surplus in January-July reached $167 billion (this is a record level) - 3.3 times more than in the same period a year earlier. Although the Federal Customs Service and the Central Bank have suspended the publication of data on exports (including oil exports), economists attribute the record trade surplus to higher revenues from hydrocarbon exports while imports fell overall.

Growth in purchases from Italy and Germany

Germany and Italy increased their imports of oil and oil products from Russia especially noticeably. The first in June increased purchases of Russian raw materials by 12% compared to May, the second - by almost 20% by the same month (in physical terms). In early June, the media reported that Italy was forced to increase imports of Russian oil for the ISAB refinery in Sicily, owned by LUKOIL. As Matteo Villa, an energy expert at the Italian analytical center ISPI, noted, the paradox is that before the tough sanctions, the refinery relied on Russian oil for only 15%, and after that it began to use exclusively Russian raw materials. This is because banks stopped lending to ISAB, which allowed it to buy oil from non-Russian sources.

Poland reduced imports of Russian crude oil by 8% by May, to 1.1 million tons. The country buys Russian oil through the Druzhba pipeline and has promised to unilaterally stop these supplies by the end of 2022 (although the European embargo does not yet prohibit pipeline imports of oil From Russia).

Ships of Russian oil by sea to the Mediterranean region rose to the highest level since mid-June, BLOOMBERG reported on August 8, citing its own ship monitoring data. Spain bought the first batch of Urals oil since April, Greece - the first batch since February. “Increased flows [of Russian oil] to several European countries before the full embargo comes into effect underscore the difficulty for the region to wind down its dependence on Moscow’s oil,” the agency writes.

Once the embargo comes into effect, the most suitable oil could come from the UAE or Kuwait, where sulfur content is close to that of Russia, but it will be difficult for those countries to ramp up production, Verevkin said. “The composition of Iranian oil is also more or less suitable for replacing Russian oil. But Iran is under sanctions, and this makes life difficult for European consumers. The EU also buys oil from countries such as the US , Nigeria, Libya, Kazakhstan, and so on. But they are all low-sulfur, which means that in any case, it will not work to instantly replace supplies from Russia, ”he commented to RBC.

RBC sent inquiries to the press services of Rosneft, LUKOIL, Gazprom Neft and Surgutneftegaz.