Russia Discounts Its Oil, and Buyers Aren't Buying It

Effects of self-sanctioning are being felt amid calls to ban Russian oil imports outright
By Arden Dier,  Newser Staff
Posted Mar 4, 2022 12:00 PM CST
Buyers Are Refusing Discounted Russian Oil
A man fishes on the ice of Finnish Gulf next to the business tower Lakhta Centre, the headquarters of Russian gas monopoly Gazprom covered by clouds in St. Petersburg, Russia, on Jan. 13, 2022.   (AP Photo/Dmitri Lovetsky)

Western sanctions on Russia's oil industry are becoming more and more likely, analysts tell CNBC, despite continued resistance from the White House. "We don't have a strategic interest in reducing the global supply of energy and that would raise prices at the gas pump for the American people around the world because it would reduce the supply available," Press Secretary Jen Psaki said Thursday, per the Hill. Less supply will mean higher prices, and that “has the potential to pad the pockets of President Putin, which is exactly what we are not trying to do."

But as NPR reports, oil traders are self-sanctioning—voluntarily refusing to buy barrels of Russian oil, even at a discounted rate. Per Forbes, "analysts report that 70% of Russian crude exports are effectively blocked, amounting to 2.5 million barrels per day (bpd), because counterparties refuse to trade." Oil companies are also abandoning billions of dollars of investment in Russia. On Sunday, BP said it would incur up to $25 billion in penalties to end its Russian investments, including selling its $19.75% stake in Russian oil giant Rosneft, per NPR. And on Monday, Shell said it would exit $3 billion worth of projects in Russia, including those with Russian state-owned energy giant Gazprom.

The result is "the current spike in prices," George Hay writes at Reuters. And Ukraine Foreign Minister Dmytro Kuleba is calling for more, urging foreign governments to impose a "full embargo" on Russian oil and gas, per CNBC. House Speaker Nancy Pelosi backed the idea on Thursday as a bipartisan bill to ban Russian energy imports was introduced in the Senate, per Bloomberg. "There should not be a single additional American dollar allowed to finance these atrocities," said Alaska Republican Lisa Murkowski. As Russia supplies about 8% of oil imports to the US (compared to about 50% to Europe), per Bloomberg, gas prices would continue rising in such a case. (More Russia stories.)

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