Gas & Oil War-Sanctions: USA Coalition vs. Russian Coalition

Written By Dr. Ziva Rozen-Bakher

https://www.rozen-bakher.com/monitoring-risks/07/04/2022

Published Date: 07 April 2022

COPYRIGHT ©2022-2024 ZIVA ROZEN-BAKHER ALL RIGHTS RESERVED

Monitoring Risks by Dr. Ziva Rozen-Bakher

Analysing in-Depth Security & Political Risks and Economic & Strategic Risks

Monitoring Risks https://www.rozen-bakher.com/monitoring-risks-1

Dr. Ziva Rozen-Bakher

Researcher in International Relations with a Focus on Security, Political and Economic Risks for Foreign Direct Investment (FDI) and International Trade

CV

Gas & Oil War-Sanctions: USA Coalition vs. Russian Coalition, 07 April 2022

The Russian invasion of Ukraine has led to severe sanctions against Russia, yet without any signal that it deters Russia from continuing with its war. However, if we look in-depth at the sanctions that the USA coalition imposed against Russia, especially by the EU, then we could see that the bans on Russian exports mainly refer to industries and activities that have less impact on Russian exports, like the latest EU ban on Russian coal, which can be compared to a ban if the EU imposes a ban on Russian gas and oil. However, the EU is heavily dependent on Russian gas and oil, so until now, the EU has avoided imposing a ban on Russian gas and oil, yet the EU mulls this option, including trying to secure alternatives, especially for Russian gas. Although in war-sanctions, not only could the USA coalition ban the Russian gas and oil, but also Russia could impose counter-sanctions against the USA coalition by cutting the gas and oil to unfriendly countries. Nevertheless, any side, either Russia or the EU, that would like to ban gas and oil should try first to secure replacement alternatives to reduce the costs and damages due to the ban. Hence, the EU should find alternative exporters for the Russian gas and oil, while Russia should find alternative importers that will buy the Russian gas and oil instead of the EU.

Considering the above, the aim of this analysis is to find out what the alternatives are that exist for each side when they try to secure alternatives and, importantly, what the risk is if one side suddenly imposes a ban without having yet solid alternatives for the other side.

Thus, this analysis includes the following appendices:

  •  Appendix I. Exports, Imports, Broking Trade, Proved Reserves of Natural Gas and Oil: USA Coalition vs. Russian Coalition

  • Appendix II. USA Coalition: Imports of Natural Gas and Oil – Dependent Analysis

  • Appendix III. War-Sanctions – Gas and Oil Analysis: USA Coalition Perspective vs. Russian Coalition Perspective

    1. 1. USA Coalition Perspective: Alternatives Exporters of Natural Gas to Replace the Russian Gas by USA Coalition

    2. 2. Russian Coalition Perspective: Alternatives Importers of Natural Gas for Russian Gas to Replace the Import by USA Coalition

    3. 3. USA Coalition Perspective: Alternatives Exporters of Oil to Replace the Russian Oil by USA Coalition

    4. 4. Russian Coalition Perspective: Alternatives Importers of Oil for Russian Oil to Replace the Import by USA Coalition

  • Appendix IV. Ranks of Exports, Imports, and Proved Reserves of Gas and Oil, sorted by Total (Higher to Lower)

    • Rank of Exports of Natural Gas Worldwide

    • Rank of Imports of Natural Gas Worldwide

    • Rank of Proved Reserves of Natural Gas Worldwide

    • Rank of Exports of Oil Worldwide

    • Rank of Imports of Oil Worldwide

    • Rank of Proved Reserves of Oil Worldwide

  • Appendix V. Analysis of Brokerage Trading of Natural Gas and Oil

  • Appendix VI. UN Votes on Russia-Ukraine War

    • UN Votes on Russia-Ukraine War: UNSC-Stopping Russia Invasion (25 February 2022), UNGA-Stopping Russia Invasion (02 March 2022), UNGA-Suspension of Russia from Human Rights Council (07 April 2022)

    • UN Vote on Ukraine among Top 50 Countries with Proved Reserves of Natural Gas and Oil

  • Appendix VII. Comparison of Alliances by Proved Reserves of Natural Gas and Oil: NATO, EU, CSTO, BRICS, SCO, CIS, EAEU

In light of the above, my analysis focuses on the following seven indicators to reveal the alternatives and risks that exist for each side in the case of imposing a ban on gas and oil, either by the USA coalition against Russia or by Russia against unfriendly countries.

  • Exports of Natural Gas, Volume and Rank. Export of gas shows which countries worldwide engage in the export of gas, including the volume and rank. In 2020, Russia ranks as the 1st top exporter in the world with a volume of 210,200,002,560 cubic meters.

  • Imports of Natural Gas, Volume and Rank. Import of gas shows which countries worldwide engage in the import of gas, including the volume and rank. In 2020, Germany ranks as the 1st top importer in the world with a volume of 119,499,997,184 cubic meters. 

  • Exports of Oil, Volume and Rank. Export of oil shows which countries worldwide engage in the export of oil, including the volume and rank. In 2020, Russia ranks as the 2nd top exporter in the world with a volume of 4,921,000 bbl/day.

  • Imports of Oil, Volume and Rank. Import of oil shows which countries worldwide engage in the import of oil, including the volume and rank. In 2020, the USA ranks as the 1st top importer in the world with a volume of 7,696,000 bbl/day, while China ranks as the 2nd top importer with a volume of 6,710,000 bbl/day, and India ranks as the 3rd with a volume of 4,057,000 bbl/day.

  • Brokerage Trading of Natural Gas or Oil, Volume. Brokerage Trading of gas or oil refers to countries that engage both in the export and import of gas or oil. Brokerage trading of gas or oil occurs when a country acts as a broker in a way that the country buys gas or oil from one country, and after that, the country sells the gas or oil to a third country, so a profit is made by the brokerage trading. However, some countries have a small volume of brokerage trading, while other countries have a big volume of brokerage trading, like the same amount of export and import of gas or oil that other countries have. Importantly, some countries have negative brokerage trading, namely the import is bigger than the export, which indicates that the country uses the import for local consumption. Thereby, they could be considered as potential importers but not as potential exporters. However, other countries have a positive brokerage trading, namely the export is bigger than the import, so if the export is significantly bigger than the import, then it indicates that the country has a local reserve for export. Thus, these countries could be considered as potential exporters but not as potential importers. Hence, the brokerage trading of gas or oil allows removing countries from the target alternatives analysis in case the countries cannot be considered as exporters or importers of gas or oil.

  • Proved Reserves of Natural Gas, Volume and Rank. Proved reserves of natural gas show which countries worldwide have proved reserves, including the volume and rank. In 2020, Russia ranks as the 1st top country with proved reserves of natural gas with a volume of 47,799,999,660,032 cubic meters, while Iran ranks as the 2nd with a volume of 33,720,000,053,248 cubic meters.

  • Proved Reserves of Oil, Volume and Rank. Proved reserves of oil show which countries worldwide have proved reserves, including the volume and rank. In 2020, Russia ranks as the 8th top country with proved reserves of oil in the world with a volume of 80,000,000,000 bbl/day, while Venezuela ranks as 1st with a volume of 302,300,004,352 bbl/day and Saudi Arabia ranks as the 3rd with a volume of 266,200,006,656 bbl/day.

The analysis of the indicators mentioned above is based on two models that take into account the geopolitical position of each coalition based on three UN votes on the Russia-Ukraine war, yet the two models run on four scenarios of the war-sanctions between the Russia Coalition and the USA Coalition, as follows:

  • UN votes on the Russia-Ukraine war

    • First Vote – UN Security Council (UNSC) – Stopping Russian Invasion of Ukraine. The first vote took place on 25 February 2022 about the UN resolution to stop the Russian Invasion of Ukraine.

    • Second Vote – UN General Assembly – Stopping Russian Invasion of Ukraine. The second vote took place on 02 March 2022 about the resolution to stop the Russian Invasion of Ukraine.

    • Third Vote – UN General Assembly – Suspension of Russia from the Human Rights Council. The third vote took place on 07 April 2022 about the suspension of Russia from the Human Rights Council

  • Models

    • Model I – The first model is based on the Second UN Vote on Ukraine, which includes countries from the USA Coalition, as well as countries from the Russian Coalition that voted in favour. It is based on the rationale that countries that voted Against, Abstained, or did Not Voted at all will not cooperate with the USA Coalition to replace the Russian gas or Russian oil because these countries are the core of the Russian coalition, namely they are loyal allies of Russia or allies with significant interests with Russia. Notably, ‘Not Voted’ signals Soft-Against or Soft-Abstained, an argument that was confirmed when we look at the Third UN vote on Russian suspension from the Human Rights Council (please see below the analysis of the change in UN votes from the second vote to the third vote). However, the analysis of the Russian perspective includes only countries from the Russian Coalition, yet it is likely that countries from the Core of the Russian Coalition who voted Against and Abstained or Not Voted (Soft-Against/Soft-Abstained) may give Russia the most significant help in the counter-sanctions against the USA coalition. Hence, Model I is based on the Second UN vote to identify the Core of the Russian Coalition vs. Non-Core of the Russian Coalition.

  • Model II – The second model is based on the Third UN Vote on Russia, which includes countries from the USA Coalition that voted In Favour, as well as countries from the Russian Coalition that voted In Favour. This model is based on the rationale that countries that change their vote from Second vote-In Favour to Third Vote-Against/Abstained/Not Voted, unlikely will corporate with the USA Coalition to replace the Russian gas or Russian oil, which may be done via excuse or direct refusal, while in the ‘good scenario’ by providing very limited quantity, yet at a very high price. However, the analysis of the Russian perspective includes only countries from the Russian Coalition, yet it is likely that countries from the Core of the Russian Coalition who voted Against and Abstained or Not Voted (Soft-Against/Soft-Abstained) may give Russia the most significant help in the counter-sanctions against the USA coalition. Hence, Model II is based on the Third UN vote to identify the Core of the Russian Coalition versus Non-Core of the Russian Coalition.

  • Scenarios of the War-Sanctions between the USA Coalition Perspective and the Russian Coalition Perspective

    • Scenario I. Alternatives Exporters of Natural Gas to Replace the Russian Gas by USA Coalition. The first scenario analyses the gas war-sanctions from the USA coalition perspective.

    • Scenario II. Alternatives Importers of Natural Gas for Russian Gas to Replace the Import by USA Coalition. The second scenario analyses the gas war-sanctions from the Russian coalition perspective.

    • Scenario III. Alternatives Exporters of Oil to Replace the Russian Oil by USA Coalition. The third scenario analyses the oil war-sanctions from the USA coalition perspective.

    • Scenario IV. Alternatives Importers of Oil for Russian Oil to Replace the Import by USA Coalition. The fourth scenario analyses the oil war-sanctions from the Russian coalition perspective.

Considering the outline above, my analysis reveals a very complicated and risky situation for the EU if Russia cuts the gas to unfriendly countries. More specifically, the analysis indicates that very limited alternatives of gas exporters exist for the EU among the USA coalition, while limited and unsolid alternatives of gas exporters exist for the EU among the Russian coalition. The main risk for the EU comes from cutting gas by Russia without yet securing solid alternatives of gas from exporters that will replace the Russian gas to the EU. In other words, the main risk for the EU is that most of the gas exporters belong to the Russian coalition, rather than the USA coalition, so there is a possibility that gas exporters will not provide alternative gas to the EU to avoid harming the relations with Russia. It may be done via excuses or even via a declaration of unwillingness to harm the relations with Russia. However, a less complicated risky situation exists for Russia if the EU bans Russian gas because many importers of gas exist among the Russian coalition, yet the gas export portfolio of Russia may change in a way that Russia will need to deal with many middle and smaller importers compared to the big volume of each importer of the EU today. Still, the full replacement may not happen immediately but in the short-term/mid-term. Even cutting the oil by Russia to unfriendly countries could pose challenges to the USA Coalition, especially in the case that Saudi Arabia will not play an important role in replacing the Russian oil, which may lead to a situation that the USA Coalition may need to find costly alternatives to replace the Russian gas or, worse, take the risk of using strategic oil reserves, like what the USA has done recently. Less risky situation exists for Russia in the case that the EU will ban Russian oil because the volume of Russian export oil is relatively low compared to the alternatives of oil importers among the Russian coalition, yet the full replacement may not occur overnight, though it is likely that it will occur in the short-run or in the mid-run.

Regardless of the above, the critical risk for the USA coalition regarding 'war-sanctions of gas and oil' comes from a war that may erupt between NATO and Russia, or worse, in the case of WWIII, because under war all types of trade halt between the fighting sides. Even intentionally shrinking the supply of gas and oil, like the embargo in the 1970s energy crisis, poses a high risk to the USA coalition in terms of supply and costs. Perhaps the embargo of Arab countries against Western countries that started due to the Yom Kippur War should be a reminder of what could happen if the Russian Coalition puts counter-sanctions against the USA coalition. Hence, imposing more sanctions on Russia will be unlikely to change the course of the war in Ukraine, but it is more likely to escalate the war-sanctions between the USA coalition and the Russian coalition with a high risk for a global energy crisis that may last a decade.  

Previous Relevant Posts From Monitoring Risks by Dr. Rozen-Bakher

Appendix I. Exports, Imports, Broking Trade, Proved Reserves of Natural Gas and Oil: USA Coalition vs. Russian Coalition

Russia - Volume and Rank of Gas and Oil

Appendix II. USA Coalition: Imports of Natural Gas and Oil - Dependent Analysis

Appendix III. War-Sanctions - Gas and Oil Analysis: USA Coalition Perspective vs. Russian Coalition Perspective

  1. Alternatives Exporters of Natural Gas to Replace the Russian Gas to USA Coalition

  2. Alternatives Importers of Natural Gas for Russian Gas to Replace the Import by USA Coalition

  3. Alternatives Exporters of Oil to Replace the Russian Oil to USA Coalition

  4. Alternatives Importers of Oil for Russian Oil to Replace the Import by USA Coalition

First Vote Second Vote Third Vote

USA Coalition Perspective

  1. Alternatives Exporters of Natural Gas to Replace the Russian Gas by USA Coalition

    Model I

Model II

Russian Coalition Perspective

2. Alternatives Importers of Natural Gas for Russian Gas to Replace the Import by USA Coalition

Model I

Model II

USA Coalition Perspective

3. Alternatives Exporters of Oil to Replace the Russian Oil by USA Coalition

Model I

Model II

Russian Coalition Perspective

4. Alternatives Importers of Oil for Russian Oil to Replace the Import by USA Coalition

Model I

Model II

Appendix IV. Ranks of Exports, Imports, and Proved Reserves of Gas and Oil, sorted by Total (Higher to Lower)

Rank of Exports of Natural Gas Worldwide

Rank of Imports of Natural Gas Worldwide

Rank of Proved Reserves of Natural Gas Worldwide

Rank of Exports of Oil Worldwide

Rank of Imports of Oil Worldwide

Rank of Proved Reserves of Oil Worldwide

Appendix V. Analysis of Brokerage Trading of Natural Gas and Oil

+Plus Gap: Local Reserve; -Minus Gap: Local Consumption

Appendix VI. UN Votes on Russia-Ukraine War

UN Votes on Russia-Ukraine War: UNSC-Stopping Russia Invasion (25 February 2022), UNGA-Stopping Russia Invasion (02 March 2022), UNGA-Suspension of Russia from Human Rights Council (07 April 2022)

Change in Votes by countries: Comparing the Three UN Votes

Note: ‘Not Voted’ refers in most of the cases as ‘Soft Against’ or ‘Soft Abstained’. The change in votes between the second vote and the third vote proved this argument.

UN Vote on Ukraine among Top 50 Countries with Proved Reserves of Natural Gas and Oil

Appendix VII. Comparison of Alliances by Proved Reserves of Natural Gas and Oil: NATO, EU, CSTO, BRICS, SCO, CIS, EAEU

Dr. Ziva Rozen-Bakher

Dr. Ziva Rozen-Bakher - A Researcher in International Relations with a Focus on Security, Political and Economic Risks for Foreign Direct Investment (FDI) and International Trade

https://www.rozen-bakher.com/
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