London: European energy companies are finding workarounds to keep Russian crude flowing while placating public opinion, a media report said.
The point is to market a barrel in which only 49.99% comes from Russia; in Shell’s eyes, as long as the other 50.01 percent is sourced elsewhere, the oil cargo isn’t technically of Russian origin, the Bloomberg report said.
The maneouvre underpins a burgeoning and opaque market for blended Russian diesel and other refined petroleum products, one of the many that oil companies and commodity traders are using to keep Russian energy flowing into Europe while at the same time satisfying public opinion that demands an end to subsidizing Russian President Vladimir Putin’s war machine, Bloomberg reported.
As Europe has stopped short of applying any limits or penalties to the purchase of Russian oil, gas or coal, selling the novel blend is perfectly legal. If Shell and others followed European rules to the letter, they could buy cargoes of 100 per cent Russian origin.
But blending is a convenient tool for companies to publicly say one thing (phase out Russian molecules) and do another (buy lots of Russian molecules), the report said.
In the case of Shell, the company has amended the so-called general terms and conditions of its contracts to allow for Russian blending.
In the oil market, traders whisper about a “Latvian blend” – a new origin for diesel that looks like a workaround to supply Russian product mixed with something else. The typical trade goes from Primorsk, a Russian oil export town near St Petersburg, into Ventspils, a port in Latvia that has a large oil terminal and tanking capacity. That’s where the blending takes place.
There are many other locations where blending is happening, including in the Netherlands, and on the high seas, in what traders call ship-to-ship transfers. For many in the market, the Latvian blend is simply shorthand for any blend that contains Russian molecules, regardless of where the mixing took place, said the Bloomberg report.
The Latvian blend is a reminder of similar backdoors to trade in sanctioned Iranian and Venezuelan crude, which for years had been offered in the Far East as “Malaysian blend” or “Singapore blend”.
For Shell, the strategy is not risk free. The company was forced to issue a rare apology last month after its traders bought a single cargo of deeply discounted Russian Urals crude, triggering an outcry that included the Ukrainian foreign affairs minister accusing the company of profiting from Ukrainian blood.