How big is the impact of this oil boycott on Russia?
“I wouldn’t say it’s a half-baked deal, but it took four weeks to close, it won’t come into effect until the winter and the pipeline oil is also exempt. If you really want to hurt, you need to shut down quickly and completely.
“That’s why I think the impact for Putin will not be too bad. The oil market is an international market, so it is going to merge, tankers are going to sail to other countries, prices are going up. This way the financial impact will be limited.’
Doesn’t it hurt at all?
‘A little bit. In the short term, mainly because oil that first went to Europe has longer on its way to the new buyers. You can already see that happening, many tankers are sailing to India and other Asian countries. So a problem arises with the availability of ships. This is difficult for Russia because it has little storage space to absorb disruptions in the transport chain.
‘Reducing production is also complicated for the Russians, because their oil comes from old fields and you can’t get it to work so easily once you’ve shut them down. So they will probably pump up that oil but try to sell it with a big discount. But yes, if the oil price is very high at the same time, as it is now, the pain is also less severe.’
In Europe it works very well.
‘Yes, certainly in the Netherlands. The ports of Rotterdam and Amsterdam normally process a lot of Russian oil and coal. There are at least five refineries in the port of Rotterdam. You have already seen in recent weeks that less Russian oil is arriving in Rotterdam because companies are subject to a kind of seleven sanctioning to do. Shell is the best-known example, but other large and small companies have also decided to stop. The trade is still there, but the throughput and processing is less.’
What kind of behavior will this provoke on the global market?
‘We received so-called Ural oil from Russia, which is relatively heavy oil. The Dutch refineries are very modern and can process many types of oil. But many simple refineries in Europe are geared to that Russian oil and cannot simply replace it with other types of crude oil. Oil from America, for example, is too light. Iranian oil is suitable, but there is also a boycott on it. The same goes for Venezuela. Negotiations are now underway with those countries to lift the sanctions. In that regard, the opportunism is of course great.
‘Under the radar, that oil, as well as Russian oil, is of course still being sold, and it is then mixed at sea. We are now also receiving more oil from the Emirates. As I said: the market will adapt to the new situation.’
Who are the big winners?
‘China and India. They are already trading with Iran and Venezuela, under the radar. And India in particular is already benefiting from significant discounts on all Russian oil that we no longer purchase. It is of course also good news for all other oil-producing countries, because they benefit from the high oil price.’
Can the oil-producing countries, which are united in OPEC, no longer supply oil?
‘That is sensitive. Russia is also affiliated with that organization, and the other members want to remain loyal to Russia. America does encourage those countries to produce more, but for the time being they don’t seem to have any intention of doing so.’
Europe said yesterday that it is ‘united’. But is the bloc not being played apart very effectively by Putin? There is now also division around the gas payments. It was also significant that he actually gave Serbia a very favorable gas deal.
‘Yes, the deal with Serbia is a typical Putin action, even though Serbia is not an EU member. There will certainly be cracks in the unit and these energy boycotts will therefore have little impact for the time being. Possibly in the longer term, because Russia will of course become a pariah and countries are all trying to become less dependent on it.’
Another part of the sanctions, which seems to hurt, is the ban on European companies from working in the Russian gas and oil industry.
‘Yes, that is certainly a problem for Russia. The knowledge, services and hich techmaterials from the EU and other countries that support the sanctions is essential for the exploration and production of new oil and gas fields. Major LNG projects in Siberia are already at a standstill. As a result, Russia is missing out on billions.’
In all this sanctions violence you would almost forget that there is also such a thing as the climate problem.
‘Yes…’
What do all these developments mean for the ambitions to reduce CO2to reduce emissions?
“In the short term, it will probably be a setback. In many European countries, including the Netherlands, there is great pressure to restart coal-fired power stations. Otherwise we risk being left out in the cold. For politicians, the choice is between doing something about social unrest in the short term or the climate problem in the long term. Then they usually opt for the short term. European Commissioner Frans Timmerman also said this when announcing the European plans to get rid of Russian gas: emit more in the short term and then reduce it more quickly. I really hope so.’
In any case, it remains very exciting in Europe.
‘Secure. For the coming winter, the question is of course whether there is enough energy to stay warm. In the medium term, over the next ten years, it will be a huge operation to generate and store all that sustainable energy. Our aim is to become autonomous as the EU. However, this transition will also create new dependencies. We are highly dependent on the countries where those metals are extracted and processed for all magnets needed for windmills or batteries in cars. That is a market dominated by China.’
That sounds quite disturbing.
‘It is. Europe is also very aware of this. Becoming truly autonomous is certainly not going to happen in the short term.’
