Sanctions Against Russian Oil Industry Have Already Manifested Themselves

Putin will have less money to spend on war.

The first consequences of the large-scale sanctions against the Russian oil industry announced recently have already manifested themselves. Russian tankers that were subject to sanctions, carrying more than 2 million barrels of oil, are idle in China's eastern waters after falling under US sanctions, Bloomberg reports. According to the agency, there are three tankers in China's eastern waters.

A total of 183 tankers associated with Sovcomflot, Rosneft and Gazprom Neft fell under sanctions. It is impossible to re-register such a large number of tankers in a short time, or to find other ways to circumvent the sanctions. And China, judging by the latest news, is not ready to violate the sanctions. It is not a fact that India, the second largest consumer of Russian oil, will be ready either. Therefore, it is most expected that in any case, the risks of working with Russian oil increase, which means the discount on it will be greater, and transportation costs will be higher.

Two oil companies, Gazprom Neft and Surgutneftegaz, were also subject to sanctions. According to Kommersant, they accounted for up to 20% of Russian oil exports in recent months. However, these sanctions were quite expected, so the ways around them have probably been calculated.

Another section of sanctions concerns a large list of oilfield service companies. In addition, American citizens will be prohibited from engaging in oil production, drilling, oilfield services, and holding any positions in Russian oil (oilfield service) companies. On the one hand, over the past few years, the Russian Federation has significantly reduced its dependence on Western technologies in service. And it adapted after the wave of sanctions in 2022, when Western service companies were supposed to leave Russia. They left, but not completely, and there were still ways around them.

However, now it is not a fact that the Russian Federation, for example, will be able to purchase drilling equipment abroad, in the same China. In addition (this has been clear since 2022), without foreign technologies, equipment and experts, the Russian Federation will not be able to work with hard-to-recover reserves. It is impossible to replace them in this case, the Russian Federation does not have such technologies, and developing our own will take time, money and specialists. As traditional reserves are developed in the long term, the share of hard-to-recover reserves in production will grow. Or it will not, if there are no technologies and equipment. That is, total production will fall.

Thus, it turns out that the new package of sanctions will in one way or another hit the export revenues of the Russian budget. It is not a fact that Putin will spend less money on the war. But Russians will clearly eat less (in a broad sense). The fall in foreign exchange earnings will lead to another fall in the ruble exchange rate, an increase in inflation, which is already declining, and a reduction in social spending in the budget (on medicine and education). Well, they deserve it.

Leonid Nevzlin, Facebook

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