Heavy embargo or “How to eat an elephant”

08 June 2022
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Banning the import of energy from Russia for markets with a large share of Russian resources is very painful. First, it disrupts the European bliss of established supply schemes and forces them to move actively in building new ones. Secondly, it is expensive, because the dominance of Russian resources is due to the low political price. Everyone understands that this needs to be done, but I really don’t want to.

Poles are once again setting a great example for everyone. In late April, they imposed sanctions on a number of Russian companies, including Novatek. It’s just that they paralyzed the country’s largest liquefied gas distributor without warning. This, as expected, raised market prices in the region (including Ukraine).

In 2021, more than 50% of liquefied gas came to Poland from Russia, again, thanks to the sweetest prices. For example, in March-April, LPG prices in Europe fluctuated around $ 900-1,000 per ton, but Russians sold gas at the Polish border for $ 500-600. Traders bought cheap Russian LPG, and sold us non-Russian, the price of the “mix” was good for everyone. Here I would like to emphasize once again that there can be no claims against the Poles regarding the purchase of Russian LPG, because it was impossible to quickly switch to alternative sources in such a large market, which also fed Ukraine.

It is possible that later the technical problems caused by the loss of “novatek” will be exhausted, and Russian gas is likely to go through some “Sibur”. But Polish traders already have a clear signal: this is an extremely unreliable and risky source. The Russians have the same signal. Who knows what other surprises the Polish government has about the new supplier or what technical work may suddenly turn the next echelon of Russian tanks into a monument?

Therefore, the expansion of alternative sources has received a new impetus. Yes, forced de-Russification will raise liquefied gas prices, but the country’s energy security will reach a new level.

And once, let me remind you, the Poles reduced their critical dependence on Russian oil by 30% through political efforts. This probably added some money to the price of fuel on the ceiling. But now look at Poland and the rest of the countries sitting on the Druzhba oil pipeline and now whining about the impossibilities and inexpediencies!

Conclusions two:

1) shock therapy is extremely helpful to understand the inevitable. Now the whining about the postponement of the embargo has signs of a desire to delay the resolution of the issue, and there may be something that will change, but if it does not change, then there will be whining again. Intermediate measures will help alleviate the situation: tariffs, quotas, and infrastructure restrictions with specific short-term deadlines.

2) Poles are beautiful!

Author: Artem Kuyun, expert of the Consulting Group A-95

Source: enkorr


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