Gas & Oil War-Sanctions: USA Coalition vs. Russian Coalition
https://www.rozen-bakher.com/monitoring-risks/07/04/2022
Published Date: 07 April 2022
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Monitoring Risks by Dr. Ziva Rozen-Bakher
Analysing in-Depth Security & Political Risks and Economic & Strategic Risks
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Gas & Oil War-Sanctions: USA Coalition vs. Russian Coalition, 07 April 2022
Related Previous Posts From Monitoring Risks by Dr. Rozen-Bakher:
USA Coalition vs. Russian Coalition: FDI and International Trade Analysis, Sanctions against Russia: USA Coalition vs. Russian Coalition, Russia Sanctions: Global Sanctions-War, Iran Nuclear Deal, Russia’s Counter-Sanctions: ‘Gazprom-Weapon’, Iran Sanctions and Shanghai Cooperation Organisation (SCO), Ukraine-Russia Crisis
The Russian invasion of Ukraine has led to severe sanctions against Russia, yet without any signal that it deters Russia from continuing with this 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 export mainly refer to industries and activities that have less impact on Russian export like the latest EU ban on Russian coal compared if the EU will impose a ban on Russian gas and oil. However, the EU is heavily dependent on Russian gas and oil, so until now, the EU 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 the USA coalition could ban 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. Therefore, the aim of my analysis below is to find out what are the alternatives that exist for each side when they try to secure alternatives, and importantly, what is the risk if one side will suddenly impose a ban without having yet solid alternatives for the other side.
In the 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 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 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 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 1st top importer in the world with a volume of 7,696,000 bbl/day, while China ranks as 2nd top importer with a volume of 6,710,000 bbl/day and India ranks as 3th with a volume of 4,057,000 bbl/day.
Broking of Natural Gas/Broking of Oil, Volume. Broking of gas/broking of oil refers to countries that engage both in the export and import of gas/oil. Broking trade of gas/oil occurs when a country acts as a broker in a way that the country buys a gas/oil from one country and after that, the country sells the gas/oil to a third country, so a profit is made on the broking trade. However, some countries have a small volume of broking trade, while other countries have a big volume of broking trade, yet there are countries that even have the same amount of export and import of gas/oil. Importantly, some countries have a negative broking trade, 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 broking trade, 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 broking of gas/oil allows removing countries from the target alternatives analysis in case the countries cannot be considered as exporters or importers of gas/oil.
Proved Reserves of Natural Gas, Volume and Rank. Proved reserves of a natural gas show which countries worldwide have proved reserves including the volume and rank. In 2020, Russia ranks as 1st top country with proved reserves of natural gas in the world with a volume of 47,799,999,660,032 cubic meters, while Iran ranks as 2th 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 3th with a volume of 266,200,006,656 bbl/day.
The analysis of the indicators above is based on two models that take into account the geopolitics 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) - Vote on Ukraine. The first vote took place on 25 February 2022 about the resolution to stop the Russian Invasion of Ukraine.
Second Vote - UN General Assembly - Vote on 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 - Vote on HRC. 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 USA Coalition, as well as countries from Russian Coalition that voted in favour. It is based on the rationale that countries that voted Against, Abstained, and Not Voted will not corporate with the USA Coalition to replace the Russian gas or Russian oil because these countries are the core of the Russian coalition namely, loyal allies of Russia or allies with significant interests with Russia. Notably, ‘Not Voted’ signals Soft-Against or Soft-Abstained, an argument that confirms in 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, still, 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 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 USA Coalition that voted In Favour, as well as countries from 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 via direct refusal, while in the ‘good scenario’ by providing very limited quantity yet in a very high price. However, the analysis of the Russian perspective includes only countries from the Russian Coalition, still, 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 USA coalition. Hence, Model II is based on the Third UN vote to identify the Core of the Russian Coalition vs. Non-Core of the Russian Coalition.
Scenarios of the War-Sanctions between USA Coalition and Russian Coalition Perspective
Alternatives Exporters of Natural Gas to Replace the Russian Gas to USA Coalition. The first scenario analyses the gas war-sanctions from the USA coalition perspective.
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.
Alternatives Exporters of Oil to Replace the Russian Oil to USA Coalition. The third scenario analyses the oil war-sanctions from the USA coalition perspective.
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 outlined above, my analysis reveals a very complicated and risky situation for the EU if Russia will cut the gas to unfriendly countries. More specifically, the analysis indicates that very limited alternatives of gas exporters exist for the EU among USA coalition, while limited and unsolid alternatives of gas exporters exist for the EU among the Russian coalition. The main risk for the EU lays in the case of cutting the gas by Russia without securing yet solid alternatives of gas with 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 to USA coalition, so there is a possibility that gas exporters will not provide alternative gas to the EU to not harm the relations with Russia. It may be done via excuses or via a declaration of unwillingness to harm the relations with Russia. However, less complicated risky situation exists for Russia if the EU will ban 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 USA Coalition, especially in case that Saudi Arabia will not play 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, to take the risk of using strategic oil reserves like what USA 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 Russia coalition, yet the full replacment may not occur overnight, yet 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 lays in case of a war between NATO and Russia, or worse, in case of WWIII, because all trade halt between the fighting sides. Even shrinking intentionally the supply of gas and oil like the embargo in the 1970s energy crisis, poses high risk to the USA coalition in terms of supply and costs. Perhaps, the embargo of Arab countries against Western countries that has started due to Yom Kippur War should be a reminder for what could be happen if the Russian Coalition will put counter-sanctions against the USA coalition. Hence, imposing more sanctions on Russia will unlikely change the course of the war in Ukraine, but it more likely escalates the war-sanctions between USA coalition and Russian coalition with a high risk for global energy crisis that may last decade.
Exports, Imports, Broking Trade, Proved Reserves of Natural Gas and Oil: USA Coalition vs. Russian Coalition
Russia - Volume and Rank of Gas and Oil
USA Coalition: Imports of Natural Gas and Oil - Dependent Analysis
War-Sanctions - Gas and Oil Analysis: USA Coalition Perspective vs. Russian Coalition Perspective
Alternatives Exporters of Natural Gas to Replace the Russian Gas to USA Coalition
Alternatives Importers of Natural Gas for Russian Gas to Replace the Import by USA Coalition
Alternatives Exporters of Oil to Replace the Russian Oil to USA Coalition
Alternatives Importers of Oil for Russian Oil to Replace the Import by USA Coalition
The analysis is based on two models:
Model I - The first model is based on the Second UN Vote on Ukraine which includes countries from USA Coalition, as well as countries from Russian Coalition that voted in favour. It is based on the rationale that countries that voted Against, Abstained, and Not Voted will not corporate with the USA Coalition to replace the Russian gas or Russian oil because these countries are the core of the Russian coalition namely, loyal allies of Russia or allies with significant interests with Russia. Notably, ‘Not Voted’ signals Soft-Against or Soft-Abstained, an argument that confirms in 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, still, 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 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 USA Coalition that voted In Favour, as well as countries from 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 via direct refusal, while in the ‘good scenario’ by providing very limited quantity yet in a very high price. However, the analysis of the Russian perspective includes only countries from the Russian Coalition, still, 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 USA coalition. Hence, Model II is based on the Third UN vote to identify the Core of the Russian Coalition vs. Non-Core of the Russian Coalition.
First Vote Second Vote Third Vote
USA Coalition Perspective
Alternatives Exporters of Natural Gas to Replace the Russian Gas to USA Coalition
Model I
Model II
Gas War-Sanctions: Russian Perspective
2. Alternatives Importers of Natural Gas for Russian Gas to Replace the Import by USA Coalition
Model I
Model II
Oil War-Sanctions: USA Coalition Perspective
3. Alternatives Exporters of Oil to Replace the Russian Oil to USA Coalition
Model I
Model II
Oil War-Sanctions: Russian Coalition Perspective
4. Alternatives Importers of Oil for Russian Oil to Replace the Import by USA Coalition
Model I
Model II
Ranks of Exports, Imports, and Proved Reserves of Gas and Oil
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
Analysis of Broking of Natural Gas and Oil - Engaging both in Export & Import
+Plus Gap: Local Reserve; -Minus Gap: Local Consumption
UN Votes on Russia-Ukraine War
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.