Western countries’ fuel sanctions against Russia come into effect on February 5

MOSCOW, February 5 – RIA Novosti. Fuel sanctions of Western countries against Russia come into effect on February 5: the European Union bans the import of Russian petroleum products, and at the same time the European Union countries and the G7 set a price ceiling for them.

The decision of the European Union to impose an embargo on both petroleum products and oil was taken last summer. Oil sanctions with a six-month delay come into effect on December 5, and fuel sanctions two months later, from February 5.

According to the materials of the European Commission, the ban on the import of petroleum products from Russia did not apply to all EU countries. Those who cannot find an alternative to Russian supply quickly will continue to import until the end of 2023. Such a temporary exception has been made for Bulgaria and Croatia, which will continue to buy kerosene, and for diesel – the Czech Republic.

Russia supplied mainly diesel fuel to Europe, as well as jet fuel, kerosene, fuel oil and naphtha. Oil products from Russia are transported in different ways: maritime transport (more than 90%) takes a large share, in addition, supplies are made by rail (around 7%) and pipelines (3%).

As with oil, a price capping mechanism is provided for petroleum products. In addition to the European Union, the G7 countries also joined it. The limits for the first go into effect on February 5, with a 55-day transition period. The G7 countries will start to apply the ceiling price without reservation as of February 5th. This means that companies from all these countries will be prohibited from providing services to third countries in connection with the maritime transport of Russian oil products at prices above the limit.

Because the prices of different petroleum products vary widely, it was decided to set two ceilings: $100 per barrel for petroleum products from Russia traded at a premium over reference oil, and $45 per barrel for those traded at a discount. Generally, lighter, more expensive petroleum products such as diesel and kerosene are sold at a higher price than petroleum, while darker, cheaper ones such as fuel oil are sold at a discount.

The European Commission will conduct a detailed market review every two months, depending on which EU member states and the G7 coalition can set prices. Price agencies suspended some of their forecasts ahead of the embargo, Bloomberg reported. According to RIA Novosti, the market price of diesel in Europe in January was around $100 per barrel.

Recently, European countries have been buying a significant amount of petroleum products, especially diesel, from Russia in anticipation of the ban. For example, according to Bloomberg, they have purchased almost a record amount of diesel since 2016 in December, with Russia accounting for about half of those deliveries. Historically, Russia supplied about half of the diesel fuel market in Europe.

As for new fuel markets, experts interviewed by RIA Novosti believe they will follow a similar path to oil. Russia will be able to transfer some of its diesel fuel volume to the Middle East, South and Southeast Asia, while Europe will receive fuel primarily from the USA and the Middle East. Experts say that the restructuring of world markets in new directions will take at least six months after the embargo.

Against the non-market measures of countries that impose price limits, Russia has prepared its own counter-sanctions. At the end of December, the President of the Russian Federation, by decree, prohibited the supply of Russian oil and oil products if the contract with counterparties directly or indirectly provides for a ceiling price. Such deliveries for oil have been banned since February 1, for oil products the date has not yet been set, it will be determined by the government of the Russian Federation. The general duration of the decree is limited to 1 July 2023.