Direct Translation via Google Translate. Edited.
by Oleg Krivoshipov
[REGNUM] The new amendment to the National Defense Act was passed on July 20 by the US Senate. Its essence, according to S&P Global , is a complete ban on the sale of oil from the country's strategic oil reserve (SPR) to China, Russia, North Korea and Iran. The amendment was approved by 85 votes to 14.
Currently, the US Department of Energy is required by law to accept the highest bids in auctions of SPR volumes from any bidders other than entities subject to US sanctions. So, in 2022, almost 1 million barrels were sold to Unipec America, a division of the Chinese state oil company Sinopec, which caused sharp criticism from the Republicans.
However, on December 1 last year, an Energy Department spokesman told the Senate Energy and Natural Resources Committee that the United States had no way of tracking oil from the SPR once it had been delivered to the buyer, and that it could be resold more than once after that.
In addition, in January 2023, the House of Representatives already passed a law prohibiting the sale and export of oil from the strategic reserve to entities owned, controlled or influenced by the Chinese Communist Party (CCP).
And according to a February report by the Congressional Research Service, of the 296 million barrels of SPR sold in 18 deals since fiscal year 2017, about 7.5 million barrels have become the property of Chinese companies. But this is only about 2.5% of the total volume of oil sold from the SPR.
Given all these circumstances, and also taking into account that two countries on the US Senate's "no list" - Russia and Iran - are themselves major oil suppliers to the world market, the new "oil" amendment looks strange. Can it pose a threat to the export of Russian "black gold" or to the energy security of China - an important strategic partner of Russia - in the future?
POLITICAL PRODUCT FOR DOMESTIC CONSUMPTION
“This is a purely political action without taking into account market realities, aimed at internal use, ” comments Alexander Frolov, deputy director general of the National Energy Institute . — The fact is that at the end of 2021, a paradoxical situation developed. The US leadership began to try to bring down fuel prices in the country by lowering oil prices outside of it. And, among other things, active sales of reserves from the strategic oil reserve began .
At the same time, in recent years, an aggressive mood has intensified in US domestic policy not only in relation to Russia, Iran and North Korea, the interlocutor of IA Regnum notes . Anti-Chinese sentiment rose.
“The theme of China for the United States has become one of the most significant ,” says the expert. “ China is officially recognized at all levels of American government as an enemy that it’s time to take seriously.”
Big turn. Russian exports have finally gone to the East and South
However, as Frolov notes, so far there have been no restrictions on the sale of US state-owned oil in China. And for opponents of the current administration of the White House, primarily for conservative circles, this has become a reason for criticism.
“But the ban on selling oil from reserves looks helpless, given that the bulk of the oil reserve has already been sold, ” the expert notes. “ What is being implemented now is tiny compared to the volumes that were sold during large interventions at the end of 2021 and throughout 2022.”
WHAT CAN AMERICA DO IN THE WORLD OIL MARKET
At the same time, the main challenge for the United States and the collective West as a whole in the oil market is not at all where volumes from American strategic reserves will be directed, notes Igor Yushkov, a leading analyst at the National Energy Security Fund (NESF ). The main problem is the futility of attempts to remove “black gold” from Russia from the world market.
“We see that oil trading and the very system of Russian oil exports are changing, starting with the geography of supplies,” the expert says. — The European market closed. What was sent to Europe now goes, for example, to India. Volumes are delivered to Europe only through one branch of the Druzhba pipeline to the Czech Republic, Hungary, Slovakia, and Serbia. A little goes to Bulgaria, where it is still shipped due to the fact that it received an exception from the embargo on Russian oil for 2024.
But mostly oil from Russia began to flow to other regions. And Western restrictions in the form of a “price ceiling”, in turn, turned into a blow to the classical transportation scheme, which was previously traditionally handled exclusively by Western companies.
“Now only Russian companies and the so-called “twilight” fleet are engaged in transportation, ” says Yushkov. - That is, the owners of the ships have also changed. Some of them are affiliated with Russian companies, some are not. But many more carriers are now associated with Russian legal entities than before.
That is, Russia's losses from oil transportation have become less, and Western operators, in turn, have lost their former positions, the source points out.
“At the same time, transportation has become more expensive for everyone, and the same volumes have to be transported further and, accordingly, longer ,” notes the leading analyst of the FNEB.
The situation in the field of transportation insurance has also changed significantly, Yushkov clarifies.
“The price ceiling for Russian oil, set unilaterally by the United States and its allies, prohibits insuring its maritime transportation if the price of volumes on a tanker exceeds $60 per barrel,” the expert says . - Naturally, none of the former insurance companies work with Russian oil, because, like the owners of ships, they simply do not understand how they should work so as not to fall under Western sanctions. Now mainly Russian companies insure, in some cases - Asian ones.
And policyholders associated with the US and other countries of the collective West, therefore, have lost this market segment.
“Previously, the huge markets of insurance, transportation, trading - and this is billions of dollars a year - Russia gave away completely simply for someone to “attach” our oil and oil products,” Yushkov argues . “Now some of these companies are connected with Russia.”
"DON'T DIG A HOLE FOR ANOTHER"
The irony of this situation is that the United States and its allies, when they introduced restrictions aimed at Russian oil, expected that the situation would develop exactly the opposite, says Frolov, director general of the National Energy Institute.
“If we look at the events of the first half of 2022, we will see that all forecasts, for example, from the International Energy Agency (IEA), said that sanctions would remove Russian oil from the world market,” the source says. - The IEA expected that 25-30% of the oil produced in Russia would go away, which meant that production should have been reduced by about 2.5-3 million barrels per day. This is a huge amount, enough to start a panic, so that oil prices rise to unprecedented levels .
But Western leaders responded by reassuring the market that Russian oil would automatically be replaced by deliveries from Saudi Arabia and the United Arab Emirates, the expert notes.
“Against this background, decisions were made on sanctions in the United States and Great Britain, on an embargo on oil and oil products by the European Union,” Frolov lists.
How will the “fall in oil and gas revenues” affect the Russians?
However, as he points out, later it turned out that the OPEC + format, which includes a number of major supplying countries, including Russia and Saudi Arabia, is able to coordinate its actions in the oil market, building a single policy in the production segment.
“It turned out that Saudi Arabia and the Emirates, if they read the IEA forecasts, for some inexplicable reason, do not perceive them as recommendations for action, ” the expert ironically. - And first the Minister of Energy of Saudi Arabia, and then the Saudi prince clearly said that they would not be able to replace supplies from Russia. This, however, was perceived by the West as “we don’t want to”, but for the market, in general, it doesn’t matter .
Thus, the failed, in essence, anti-Russian line of the collective West led by the United States in the oil market has led to a situation in which the influence of countries unfriendly to Russia (and to a certain extent to Iran, North Korea and China) on the global oil market has significantly decreased, which came as a complete surprise to the authors of the “sanctions crusade”.
If the calculation of the authors of this anti-Russian policy were justified, then the world oil market would indeed find itself in a new, poorly predictable reality with a constant risk of sharp price hikes. Such a reality would indeed be easier for the United States to manipulate with its strategic oil reserve.
However, events did not take the turn Washington expected. And legislative decisions of the US Senate, like the one adopted on July 20, are not capable of having any consequences other than domestic ones.
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