Home Ukraine’s Lubricant Industry in Peril
Watching the indescribable events that started in Ukraine yesterday, it is imperative to write about the country as one of the largest lubricant markets in Europe. It is a major consumer of not only Russian energy but also base oil and petrochemicals. The livelihood of Ukraine’s lubricant industry is in peril, but it was already precarious. The Russian government has a number of times in the past imposed and relaxed bans on exports to Ukraine of products including lubricants and slack waxes.
In 2019, a ban was part of a tit-for-tat trade dispute after Ukraine imposed economic sanctions on Russia in 2018 and 2019. Then in 2020, Russian authorities relaxed the ban on exports of base oils, lubricants and other petroleum products, stepping back from sanctions that had been gradually imposed by the West. Some companies considered the ban a mere bureaucratic hurdle, and a number of Russian base oil and lube marketers found ways to bypass these sanctions regardless.
However, in early 2021 Ukraine still faced short base oil supplies. Like many other countries in Europe, it was battling the effects of the pandemic-induced drop in fuels demand and slashed refinery rates, which in turn reduced supply of vacuum gas oil feedstock for production of base oils. After the continent’s lockdowns were lifted during the summer, finished lubricant demand peaked by September, but the market suffered from limited base oil availability, due to the continuing reduction in base oil shipments from Russia.
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Speaking of sustainability, in 2020 Ukraine added a layer to its border control of base oil and lubricant imports in an effort to curb the illegal mixing of waste oils with finished products, as well as unlawful burning or dumping in landfills. One of the crucial problems in the formation of Ukraine’s waste oils market is that significant volumes of these oils end up on the black market, where they are used as heating fuel or are mixed with other finished products. This will surely get worse now, wreaking untold damage to the country’s machinery from which recovery will take years.
Just six weeks ago, the Center for Strategic and International Studies released an article titled “Russia’s Possible Invasion of Ukraine,” in which it is stated: “If deterrence fails and Russian forces invade Ukraine, the United States and its allies and partners should conduct several immediate steps and enact a Twenty-First Century Lend-Lease Act to provide Ukraine with materiel at no cost. Priority items should also include lubricants.”
All of the aforementioned may seem trivial in light of the current events, but there will certainly be a negative effect on the sustainability of Ukraine, its economy, industry and citizens.
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