Blow to Putin as Europe breaks free of Russian oil for good


Putin

Putin

Western Europe has broken free of direct Russian oil imports for good in a blow to Vladimir Putin, research by the European energy consultancy Rystad suggests.

Analysts found that the UK and much of Europe have reversed a years-long rise in reliance on Russian oil and gas before the Ukraine conflict, shifting instead to other suppliers such as the US and Canada.

Jorge Leon, Rystad’s senior vice president for oil markets, said: “I think people underestimated how flexible the energy system is.

“Just before the war, just the idea of, we’re going to stop buying oil and gas directly from Russia, would have been crazy. But it has largely happened.”

According to Eurostat, in 2020 imports from Russia made up 39pc of the gas used in the European Union, 23pc of oil imports and 46pc of coal imports.

The UK relied on Russia for about 30pc of its diesel, 27pc of its coal and up to 10pc of its gas – which arrived partly on ships as liquid natural gas (LNG) and partly via trans-European pipelines.

On official figures this has now fallen to practically zero.

It is thought that quantities of Russian fossil fuel have still been arriving via refineries in other countries, although Mr Leon – who will be speaking at International Energy Week in London this week – said that the overall amounts are still diminishing.

Mr Leon said the key to breaking Russian dominance had been a surge in supply from other sources which were also outside Opec, the cartel of mainly Middle Eastern countries to control supply and prices.

He said: “Non-Opec supplies do not usually grow that much but 2023 was a massive year.”

“The stars aligned and you had new projects come in from Brazil, Argentina, Canada, Norway, and so on. So that saved us in a sense.

“And then you look at the US, growth has continued very, very strongly through 2023.”

The economic slump that hit the UK and Europe since 2022 had also played a role, by decreasing overall energy demand.

Mr Leon said: “Demand in the OECD [a group of rich developed countries] has actually decreased last year and likely in 2024. So in a sense, we were kind of lucky that our economic growth  in 2023 was lower.”

Cutting off Russian supplies has, however, proven a slow task. Mr Leon warned that some of the apparent decline in trade with Russia could be illusory – because the Kremlin was selling more crude oil to countries like India.

There, it could be processed into products like diesel that could be sold on to the UK and Europe.

He said: “Oil that was initially flowing from Russia into Europe is now going to China and India, from where suppliers are shipping to Europe.”

The Centre for Research on Energy and Clean Air, which tracks Russian energy exports by value and destination, estimates that Russia has earned €605bn (£517bn) from fossil fuel exports since February 2022 when it invaded Ukraine. About €188bn of that money came directly from EU countries.

Ashley Kelty, director of oil and gas research at Panmure Gordon investment bank, said the UK had halted direct imports of oil from Russia but the reality was more complex.

He said: “The UK was dependent on Russia for diesel fuel – 30pc came from Russia pre sanctions. This has been replaced by Russian diesel refined in India and China, and therefore outside sanctions.

“The EU was very reliant on Russian gas – about 40pc of all gas used came from Russia. This has been replaced by US LNG and by demand destruction through two mild winters and the collapse of German industrial demand.

“So the reliance on Russia is largely broken but they still remain important to global supply, as China and India buy much of their products now – albeit at large discounts. If they  were forced to exclude Russia, then there would be another energy crisis with huge shortfalls in crude and LNG supplies.”

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