BRUSSELS (AP) — In the most significant effort yet to punish Russia for its war in Ukraine, the European Union agreed to ban the overwhelming majority of Russian oil imports after tense negotiations that tested how far the bloc is willing to go to ostracize Moscow.
From the moment Russia invaded on Feb. 24, the West has sought to make Moscow pay economically for its war.
But targeting the lucrative energy sector was seen as a last resort in Europe and has proved hardest since the bloc relies on the country for 25% of its oil and 40% of its natural gas. European countries that are even more heavily dependent on Russia have been especially reluctant to act.
In a move unthinkable just months ago, EU leaders agreed late Monday to cut around 90% of all Russian oil imports over the next six months.
China will make a killing on this. They will buy at a discount to market price from Russia. Russia will get a higher price than they would have gotten and the west will pay a steep premium to punish Russia.
In the process, the “punished” Russia makes 50 to 80 percent more money per barrel of oil, China gets a comparative competitive advantage in production because its energy inputs are comparatively lower than the west.
Russia will have serious issues with manpower and materials lost in Ukraine, the fighting must
stop soon or Russia will simply collapse. However, a cease fire with no peace and Russian control of the mostly Russian speaking areas will lock in the status quo without collapsing Russia. (Maybe)
China will make a killing on this. They will buy at a discount to market price from Russia. Russia will get a higher price than they would have gotten and the west will pay a steep premium to punish Russia.
I do not understand.
If oil is fungible, how can China buy at a discount and Russia sell at a premium?
Also, in this China pays less/Russia earns more scenario, why didn’t they do this before the embargo?
If oil is fungible, how can China buy at a discount and Russia sell at a premium?
I think the point qaz is trying to make is that China gets to buy Russian oil cheaper than it would have in a normal market, while Russia just plain gets to sell it at any price.
Oil qua oil is fungible but oil delivered from well to refinery is not. There exists the infrastructure to ship oil from Russia to Europe but no so much to China.
It simply does not make sense for Europe to finance Russia’s war effort. It’s a cost worth bearing.
BTW, the agreement is “by year’s end.” The war might be over by then if NATO sends sufficient armament to Ukraine.
EU agrees to phase out Russian oil but exempts pipeline deliveries www.washingtonpost.com/world/2022/05/30/eu-oil-russia-ukrain…
After weeks of negotiations, the 27 countries agreed Monday to end seaborne deliveries of Russian oil within months. Pipeline deliveries will continue to flow for now. Several countries will also get extensions or exemptions, according to E.U. officials and diplomats…
The exemption for pipeline oil allows continued supplies through the Druzhba network, which runs through Belarus to Poland and on to Germany, and through Ukraine to Slovakia, the Czech Republic and Hungary. EU officials say pipeline oil accounts for a third of imports.
Petroleum products can be “fingerprinted” as to their source by identifying trace metals, salts, and even traces of the organisms that predominated in the mix laid down that then converted into petroleum over eons.
Russia could be nailed if enough of the world wishes to do so. Of course, China and a few other nations could simply replace all their other sources with Russian oil, but that change in commerce would be quite expensive…
China has some of its own oil first. China has contracts with a lot of other entities for oil. Russia comes in a distant second or third or forth there. China is still imploding economically and will use less oil.
China and India wont take as much Russian oil as the Europeans were for a lot of reasons.
For now the market traders in oil are playing it as Russian oil off the market which it is hence the premium in the market.
The second wave of actions after this…Russia is going to be undercutting OPEC…think about that as we go down this road.
Because OPEC will be selling more to Europe.
If Russia chases its tail the discounts will need to be further discounted.
If oil is fungible, how can China buy at a discount and Russia sell at a premium?
The embargos create a false shortage in the open market. China exploits this to buy oil from Russia. Russia attempts to sell at the market price but cannot because China is one of the few buyers of Russian oil.
So yes oil is fungible, and yes the supply of oil will balance and yes shipment to and processing of oil is disrupted. Some oil cannot be processed by the refineries that it can be shipped too, and some oil simply cannot be shipped from here to there. Still al lot of the problems are artificially produced by politics and China gets to skim off some serious cash