Russia can’t sell petroleum products any longer — what will it lose?

February 06, 2023

Today, on February 5, an embargo on sea deliveries of gasoline, kerosene, diesel fuel, fuel oil and nafta from Russia to the EU came into effect. This day, the European Union stopped buying Russian petroleum products. And two months ago, the EU refused to buy oil. Supply via the Druzhba pipeline was not restricted, the EU only banned sea imports. At the same time, the countries of the European Union, G7 and Australia set a price "cap" on Russian oil and petroleum products. It may be lowered once every two months. Razumkov Centre energy programmes director Volodymyr Omelchenko explained on the air of the Ukrainian Radio what consequences it bears for Russia, Europe and Ukraine. 

"Russia's share in all petroleum products traded in the world is 9%"

Volodymyr Omelchenko cites a figure of more than 1 million barrels of Russian petroleum products per day that were supplied to Europe. In that, 700,000 barrels are diesel fuel. "If we take the global market of petroleum products trade as a whole, Russia's share was 9% of all traded products. This is quite a lot. Every year, Russia received 160 billion euros for its petroleum products. This is a quarter of the funds that Russia earns from all hydrocarbon exports."

"There will still be enough money for weapons and the army"

Omelchenko says that the Russian budget was planned with a 2% deficit this year. It rests of the oil price of 70 dollars per barrel. Today, it is much lower: 48–52 dollars per barrel. Add to this the embargo on petroleum products – the Russian budget will lose another 4-5 trillion roubles. This will be quite a strong blow. "But there will still be enough money for weapons and the army. We should part with illusions. Russia is pursuing a policy of cutting social expenditures, expenses on sports, culture, pensions and professional education. Defence and security remains the priority. It will be worse for Russia's regions, social sector, utilities. They are even starting to rip off Gazprom little by little," the expert notes.

Price "cap"

Russia will continue to sell oil on the markets of third countries that did not impose an embargo. The same will apply to Russian petroleum products, Volodymyr Omelchenko says. At the same time, a price "cap" was introduced for Russian oil and its products. Why? Because while imposing limitations on Russia, they should avoid a sudden jump in prices of oil and petroleum products on the world markets. Such limitations can only be gradual. (Currently, the "cap" is $60 per barrel of oil, $100 for petroleum products such as diesel fuel, and $45 for fuel oil – Ed.).

At the same time, the G7 countries introduce not a "price cap", but an embargo. This also applies to EU countries, Australia and Switzerland that have joined this embargo, with the exception of Bulgaria and Hungary (supply via the Druzhba pipeline was not restricted — Ed.). The "price cap" applies only to third countries. If they buy Russian petroleum products more expensively than this "cap", then they will face sanctions on carriers, insurance companies, brokerage offices. And it will be very difficult to deliver these petroleum products, since businesses engaged in transportation will not want to take risks," says the Razumkov Centre energy programmes director.

Alternatives – India and China 

"I do not expect a rapid increase in the prices of petroleum products," the expert adds. Perhaps there will be some uncertainty, a little fluctuation and some growth during the month. This "cap" is precisely calculated so as not to immediately leave the world market without Russian petroleum products and to prevent sharp fluctuations. Russian oil and petroleum products will be sold. The latter are more difficult to replace than oil, because alternative to the EU markets are China and India that have powerful oil refining industries and do not need imported petroleum products. They need Russian oil. China and India buy it cheap, process and sell on the world market, making profit." That is, the increase in the production of petroleum products by China and India will be achieved thanks to the increases in purchases of cheap Russian oil.

Gasoline and diesel fuel from oil of non-Russian origin 

The EU will replace Russian gasoline and diesel fuel with purchases of oil of non-Russian origin on international markets, says Volodymyr Omelchenko. Hence, European oil refineries will receive additional volumes of raw materials and produce more petroleum products. In this way, Russian gasoline, diesel fuel, etc. will be replaced, the Razumkov Centre energy programmes director sums up.

There will be no shortage of petroleum products in Ukraine, Volodymyr Omelchenko assures. Today there is a certain surplus, the expert says. It is connected with the seasonal decrease in demand for petroleum products, due to high prices and low business activity in Ukraine. Logistics links for the petroleum products supply from the EU have already been created. "A significant part of the deficit of petroleum products in the EU will be covered by supplies of petroleum products from India, which processes Russian oil. But they will no longer be considered Russian, according to different schemes." 

Closure of refineries in the Russian Federation

A decrease in the exports of Russian petroleum products will not go unnoticed for Russia. Oil refining will decline by 15-20%. Some refineries will be closed, and some will work not at full capacity, which will lead to unemployment, the specialist predicts.

The Russian mafia sells oil illegally 

Today, there is no need for the illegal sale of oil, says Volodymyr Omelchenko. "Trade is going on legally. No one wants to buy oil and petroleum products from Russia, violating sanctions. Illegal schemes can be used by the Russian mafia to evade taxes in Russia and take money offshore. But all this happens with the consent of the Kremlin top."



Volodymyr Omelchenko

Director, Energy Programmes

Born in 1967 in Kyiv

Education: Kyiv Politechnic Institute, Department of Chemical Engineering (1992)

Author of over 50 scientific works and op-ed publications. Took part in development and implementation of international energy projects and scientific research in international energy policy


1992 – 1996 — worked in different positions in the mechanical engineering industry

1997 – 1998 — Head Expert of the Division of Oil, Gas and Petroleum Refining Industry of the Ministry of Economy of Ukraine

1998 – 2003 — Naftohaz Ukrayiny National Joint-Stock Company, in Charge of Oil Transportation Section

2004 – 2007 — Chief Consultant at the National Institute of International Security Problems of Ukraine’s NSDC

since February, 2007 — Leading Expert, Razumkov Centre. Director of Energy Programmes since 2013

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