Legal departments of traders are trying to understand how to act under new sanctions against Russia.
Large global trading companies plan to reduce purchase of oil and fuel from Russian state-owned oil companies on May 15 to avoid violating EU sanctions against Russia. According to Reuters, the EU did not impose a ban on Russian oil imports in response to Russia's invasion of Ukraine, as some countries, such as Germany, are heavily dependent on Russian oil and lack the infrastructure to switch to alternatives.
However, trading companies are curtailing purchases from Russia's Rosneft energy group as they seek to adhere to existing EU sanctions aimed at restricting Russia's access to the international financial system, sources said.
EU sanctions exclude procurement. oil in Rosneft or Gazpromneft, which are listed in the legislation and are considered “strictly necessary” to ensure Europe's energy security.
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According to sources, traders are trying to understand what is meant by “strictly necessary”. This may include refineries that receive Russian oil through a pipeline, but may not include the purchase and sale of Russian oil through intermediaries. They are cutting back on procurement to ensure compliance with the requirements by May 15, when EU restrictions take effect. future sales.
Trafigura, a major buyer of Russian oil, told Reuters that it “fully complies with all sanctions.” We expect that our trade volumes will be further reduced from May 15. “
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Vitol, another big buyer, declined to comment on the May 15 deadline. Earlier, Vitol said that trade in Russian oil “will decline significantly in the second quarter with a reduction in current forward contractual obligations,” and by the end of 2022 they will stop trading in Russian oil .
The war and sanctions against Russia have already led many Western Russian oil buyers, such as Shell, to suspend new spot purchases.
European refiners are less and less willing to refine Russian oil. This has already undermined Russian exports, although purchases by India and Turkey have partially offset the shortfall. Sales to China also continue.
According to the shipment plan, Rosneft and Gazpromneft amounted to 29 million barrels in April, or almost 1 million barrels per day, which is more than 40% of total Urals crude oil exports from Russia's western ports in April. >
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The International Energy Agency said that supplies of Russian oil could be reduced by 3 million barrels per day compared to May.
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Rosneft declined to comment. Gazpromneft did not immediately respond to Reuters' comments. Other Russian oil buyers, Gunvor and Glencore, declined to comment on the impact of the deadline.
Energy traders face reputational risks due to current Western sanctions. They must carefully study which organizations can be paid, as well as the nationality of their employees. In addition, the lack of a direct ban makes it difficult to terminate existing contracts.
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“All companies are sitting with their lawyers to find out what they can and cannot do, “said a senior trade source. “It is unclear what this means for the entire supply chain, for shippers, insurers,” he said, adding that his firm was considering selling oil to the private sector. “Lawyers are delighted.” Where there is uncertainty, companies will retreat. Russian oil flows will be significantly reduced in the future. “
