Russia spent almost 50 years building its energy market in Europe, but Russian President Putin destroyed it in less than 50 weeks - it will be almost impossible to find a replacement for him - writes Bloomberg.
The publication's oil analyst Julian Lee writes: "While Russia has found alternative markets for its oil, mainly in India, reorienting sales of petroleum products and — perhaps even more — natural gas will take years and cost a lot of money. If at all it will be possible to create sales markets in conditions where the world abandons fossil fuels."
Lee emphasizes that after the beginning of the Russian invasion of Ukraine on February 24, 2022, the European market, which consumed almost 2,5 million barrels of oil per day, 1 million barrels of petroleum products and 155 billion cubic meters of gas per year, almost disappeared.
According to analyst Julian Lee, the European market for Russian natural gas has also been lost: "The vast network of gas fields and pipelines that have spent hundreds of billions of dollars on development since the first gas crossed the border of Austria in 1968 is today thrown into the trash."
As of 2017, an estimated US$100 billion had already been invested in the development of gas fields on Russia's Yamal Peninsula, most of which were connected to Europe by pipelines, including those that pass through the Baltic Sea and connect Russia to Germany.
"It is possible that Russia will be able to establish new energy relations with Europe after the end of the war, but it is unlikely that EU countries will allow themselves such dependence on Russian gas as was the case a year ago," the analyst emphasizes.
According to him, governments and consumers in Europe have finally given serious thought to the issues of demand restraint and energy efficiency, and record gas and electricity prices have stimulated investments in renewable energy sources and the first serious attempts to change the way retail electricity prices are formed, taking into account the decrease in the share of fossil fuels in electricity production.
Russian oil companies managed to divert oil supplies, but this was largely due to Indian refiners' greed for cheap crude.
But according to Lee, such a reorientation has cost Russia and its oil industry dearly. Penetrating the Indian market required deep discounts of up to $35 per barrel, equivalent to a 40% price cut.
By the end of last year, Russian barrels accounted for about a quarter of India's oil imports, displacing shipments from the subcontinent's traditional Middle Eastern suppliers — Saudi Arabia, Iraq, the United Arab Emirates and Kuwait.
"I'm sure there will be countries willing to buy cheap Russian diesel while exporting their own locally produced fuel back to Europe, but they will demand big enough discounts to make the trade profitable — another cost that the Kremlin and its oil companies.
But oil, whether crude or oil products, has a great advantage over natural gas: it can be easily and cheaply transported by sea.
For most of the past 55 years, Russia has been looking for gas buyers in the West. Huge pipelines thousands of kilometers long connected gas fields, first in Siberia, and more recently on the Yamal Peninsula, with buyers in Europe.
In the past decade, Russia began looking for new gas markets in the east, and the Power of Siberia pipeline now supplies fuel to China. But that gas comes from new fields more than 1300 miles east and 600 miles south of the Yamal fields, which used to supply gas to Europe but are now unused.
Russian state-owned gas giant Gazprom has estimated the official value of the Power of Siberia gas pipeline and associated gas fields at $55 billion. An independent valuation put the figure at almost twice that amount — an investment that looks like it will never pay off,” the analyst writes.
Putin's war in Ukraine cost Russia the European energy market. It will not be easy to replace him. Whatever rapprochement Moscow and Europe ultimately achieve, Russians will be counting the cost of the war for generations to come.
