Sign up now for FREE unlimited access to Reuters.com Register LONDON, April 13 (Reuters) – Major global trading companies plan to cut crude and fuel purchases from state-controlled Russian oil companies as early as May 15, sources said, to avoid European Union sanctions on Russia. The EU has not imposed a ban on Russian oil imports in response to the Russian invasion of Ukraine, as some countries, such as Germany, are heavily dependent on Russian oil and do not have the infrastructure to exchange alternatives. [nL5N2VO3PE] The companies, however, are shutting down purchases from Russian energy group Rosneft as they seek to comply with the language of existing EU sanctions aimed at restricting Russia’s access to the international financial system, the sources said. Sign up now for FREE unlimited access to Reuters.com Register The wording of the EU sanctions excludes oil markets from Rosneft or Gazpromneft, which are mentioned in the legislation, which is considered “strictly necessary” to ensure Europe’s energy security. Traders are struggling with what is “strictly necessary,” the sources said. It may cover an oil refinery that receives Russian oil through a blocked pipeline, but it may not cover the purchase and sale of Russian oil through intermediaries. They cut markets to ensure they comply by May 15, when EU restrictions take effect. The inclusion of the Russian state-owned infrastructure company Transneft, which owns the main ports and pipelines, will add an extra level of complexity to any future sales. Trafigura, a major Russian oil buyer, told Reuters it would “fully comply with all applicable sanctions. We expect our trading volumes to decline further from May 15.” Vitol, another major buyer, declined to comment on the May 15 deadline. Vitol had previously stated that Russian oil trading volumes “will decrease significantly in the second quarter as current contractual obligations decrease” and will stop trading Russian oil by the end of 2022. The war and sanctions in Russia have already led many Western buyers of Russian crude, such as Shell, to stop buying new spot markets. read more Refineries in Europe are becoming increasingly reluctant to process Russian crude. This has already disrupted Russian exports, although markets from India and Turkey have offset some of the easing. Sales in China also continue unabated. Rosneft and Gazpromneft volumes accounted for 29 million barrels, or almost 1 million barrels per day (bpd) in April, which is more than 40% of total Ural crude oil exports from Russia’s western ports in April, according to the loading plan. The International Atomic Energy Agency (IAEA) said on Wednesday that Russia’s oil supply could be cut by 3 million bpd from May. read more Rosneft declined to comment. Gazpromneft did not immediately respond to a request for comment. Other Russian oil buyers, Gunvor and Glencore, declined to comment on the impact of the deadline. Energy trading companies face risks of compliance and reputation from the current series of Western sanctions. They need to carefully consider which entities can pay as well as the nationalities of their employees. Also, the lack of a final ban complicates the termination of existing contracts. “All companies sit down with their lawyers to figure out what they can and cannot do,” said a senior trading source. “It’s not clear what this means for the whole supply chain, for shippers, for insurers,” he said, adding that his company was considering the consequences for non-state oil sales. “Lawyers are rejoicing in this. Where there is uncertainty, companies will back off. Russian oil flows will be significantly reduced in the future.” Sign up now for FREE unlimited access to Reuters.com Register Report by Julia Payne and Reuters. Edited by: Jane Merriman. Our role models: The Thomson Reuters Trust Principles.
