Sanctions Further Restrict Russian Exports


Sanctions Further Restrict Russian Exports
Ursula von der LEYEN, President of the European Commission. © Alexandros Michailidis /

The European Union introduced a new set of sanctions against Russia last week that restricts Russian oil and petroleum products – including base oils and lubricants – from being resold from EU member states to other countries.

That measure is part of the eighth package of sanctions imposed by the bloc since Russia’s invasion of Ukraine also adopts a mechanism to set price caps on sales of petroleum products transported by sea from Russia to non-EU countries. The bloc adopted the latest sanctions in response to a series of actions that it described as escalating Moscow’s war.

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The price control depends on an international consensus pushed by coalition led by the Group of Seven advanced economies. The plan calls for participating countries to deny Western-dominated services including insurance, finance, brokering and navigation to oil cargoes priced above the cap. The G7 includes Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

European Commission president Ursula von der Leyen said to the package focused on Russian oil because “Moscow earned a great deal of revenues from oil after its illegal war on Ukraine inflated global energy prices.”

The new measures add onto the EU’s previously adopted ban of Russian crude and refined petroleum products imports to member countries, agreed upon in June. The price cap for imports to other countries takes effect December 2022 for crude and February 2023 for petroleum products. Contracts signed before Oct. 7 of this year may continue until Jan. 8, 2023.

Industry insiders said that when implemented, this measure would significantly decrease the volume of Russian base oil exported to international markets.

“The measure is effectively shutting off Russian base oils [and lubricants] flows to the European markets, starting in the beginning of 2023,” Denis Varaksin, senior manager at Berlin-based base oil trading company DYM Resources, told Lube Report on Monday.

In 2021, Russian exports of base oil amounted to around 1 million tons, according to DYM.

“Export of Russian base oils has been drastically reduced,” Varaksin said. “In 2022, we anticipate it to go down as low as 30% of the total exported volume last year.”

He added that during this period, the main buyers of Russian base oil were Kazakhstan, Azerbaijan and Turkey.

Because of sanctions, ports in the Baltic Sea have not received Russian base oils for weeks, according to the Oct. 4 Lubes’n’Greases’ EMEA Base Oil Price Report.

The new measure could significantly lower activities in Black Sea ports as well, cutting off Turkey, a non-EU member, from reselling the Russian products to third countries, according to Varaksin.

“The demand for Russian base oil in Kazakhstan, Azerbaijan and Turkey is limited,” he said. “Resale through Turkey will continue but outside of Europe. Product will not go there [anymore].”

The new measures exempts Russian exports to non-EU countries sold at or below a pre-established price cap agreed by the G7 coalition. With this, the commission aims to mitigate the adverse effects on nations depending on Russian energy.

“Previous and newly issued sanctions have had negative short-term effects … on the economy of Russia,” said Artem Mazaev, consultant at Lubribase, a Russian database on lubricants and greases. “[T]he economy is demonstrating the ability to adapt to the restrictive measures.”

According to Mazaev, the sanctions are a double-sided sword that effects both the nations imposing them and Russia.

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