The immediate supply shock caused by Russia’s invasion of Ukraine was felt in power, petrol and supermarket prices across Europe — and now, as the war enters its fifth month, sanctions and financing restrictions may trigger supply-side changes that could affect natural gas, crude, diesel and grains for years to come.
Russia’s commodity exports fell as a result of Western sanctions, purchasers self-sanctioning and security issues on the supply routes, and Europe’s imports are set to decline further as phased sanctions come fully into effect, mostly by early 2023.
Russian countersanctions include a rule stipulating that European consumers should pay for Russian gas via a ruble-payment mechanism. Gazprom has cut off several countries that have refused to comply.
As the conflict continues, the likelihood grows of new measures targeting other areas of commodity trading, and Russia’s response could include further attempts to change payment terms.
Sanctions’ effect on Urals crude
Sanctions will bring a near total ban on EU imports of Russian oil in early 2023, with member states prohibiting most seaborne Russian crude in six months, and Russian oil products embargoed after a nine-month transition period. The EU and UK also announced a joint plan to ban the insurance and financing of vessels carrying Russian oil to third countries, after a wind-down period of six months.
Replacing Russian diesel
Europe has a structural deficit in diesel, and it imports more than 3 million mt of the product each month, of which Russia had been providing more than 2 million mt until its war with Ukraine.
German generators turn to coal
The war has also triggered serious concerns on the European gas market given Russia’s importance to supply. Russian gas transit via Ukraine to the EU has continued despite the war, though deliveries are currently low, with transit halted via the Sokhranivka entry point after Kyiv declared force majeure.
Jitters over lost grain, sunflower oil exports
For the grains market, the primary impact of Russia’s invasion has been through the closure of deepsea ports in Ukraine, which were mined as a defensive measure and are now blockaded by Russian warships.
Before the war, Ukraine’s wheat was already in the ground for the 2022-23 marketing year, and the previous year’s wheat crop had already been exported.
source: hellenicshippingnews
