The European Union’s 18th package of sanctions on Russia will have little effect on base oil markets or revenues, according to a senior base oil trader who spoke to Lube Report.
Russia’s income from energy exports is a mainstay of the country’s economy, accounting for roughly 20% of gross domestic product and contributing about 50% of the federal budget, according to the Oxford Institute for Energy Studies. New restrictions on refined product exports from Russia take effect Jan. 21, and are aimed at weakening revenues from energy sales and the country’s capacity to continue the war against Ukraine.
EU buyers must demonstrate that refined products are not derived from Russian crude. Refiners will be required to observe a 60-day period during which no Russian crude has been discharged at the shore terminals supplying the export cargo.
“If one talks to authorities in Brussels or London, nobody has the faintest clue as to how the product sanctions are going to work,” Ray Masson told Lube Report. “An ill-thought-out piece of political legislation.”
As to whether the new sanctions will have any meaningful effect on Russian base oil movements, Masson was blunt: “Nil, zero, nada.”
“This change will reshuffle both crude and product flows, increase documentation demands, and push some barrels onto new routes,” said Mick Strautmann, a market analyst at energy industry data platform Vortexa, in an analysis.
India and Turkey are the main importers of Russian crude that also export refined products to Europe, primarily middle distillates. Together, these countries account for 22% – or about 300,000 barrels per day – of the EU’s middle distillate imports from outside the region in 2025, according to Strautmann.