EU to Embargo Russian Oil, Petrochemicals


EU to Embargo Russian Oil, Petrochemicals
Russian oil tanker on the Baltic Sea. © Adriana_R

The European Union announced last week that it will impose an embargo on Russian crude oil and refined products, including base oils and lubricants, by the end of 2022.

Russian refiners who export base oils will be hit hard by the measure, part of the sixth round of EU sanctions imposed in the wake of Moscow’s military invasion of Ukraine. The embargo is similar to one that the political and economic bloc imposed for a number of years against Iranian oil over that country’s nuclear program. The EU lifted that embargo in 2016.

The measure, announced last week by European Commission President Ursula von der Leyen, would ban imports of Russian crude oil and refined products by nearly all of the EU by the end of the year. Hungary and Slovakia, which are said to be too dependent on Russia for energy, are temporarily exempted, receiving a grace period until December 2023.

The United States has already banned imports of Russian crude.

Domestic marketers of finished lubricants would not be affected by the EU’s embargo, because Russia traditionally is not an exporter of finished products to Europe, except to bordering countries, like Ukraine and the Baltic states.

“It is difficult to say how this ban will affect our industry,” a lubricant producer who asked not to be identified, told Lube Report. There are always possibilities for alternative base oil export channels, such as India, Southeast Asia or China, the producer said.

Rosneft and Gazprom Neft did not respond to questions.

Alternative logistics routes to Asia or other destinations are overloaded and will not be able to take Russian export flows, Denis Varaksin, base oil trader with the Berlin-based DYM-Resources, told Lube Report last week.

Because of the sanctions and the imminent oil embargo, he said, Russian refiners are going through a big transition.

“Everybody is actively looking for ways to diversify their business,” Varaksin said.

He predicted those who still buy Russian oils will stop doing so around the middle of May. In the previous round of sanctions, deliveries on already completed contracts were allowed until May 15. He said companies would stop Russian base oils because of financial and logistics measures against Russian banks and transporters.

“It is very difficult to make any payment to Russia as major European and international banks refuse to do the transfers, even if it is absolutely legal,” Varaksin said. “The EU also banned Russian-registered trucks from carrying products in the EU, while major shipping lines like Maersk, MSC and CGM-CMA do not accept booking for Russian cargoes. Shipowners for bulk business are also refusing to take Russian cargoes.”

As a result of sanctions, DYM expects Russian base oil exports to slump from 30% to 50% this year and to further decline in 2023. In 2021, Russian land and rail base oil export deliveries reached 1.2 million tons, the trader said.

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