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A ban on Russian oil is growing. The U.S. has already already taken that step, and the Europeans are seriously discussing cutting off not just oil, but also the country’s natural gas and refined product exports. What in the world is it going to take to make that happen? And would China benefit?
It requires a lot of countries that have been very hostile to the idea over the years of agreeing to go with it. But it’s time to start talking about what that looks like because it probably is inevitable, and it’ll almost certainly happen in April.
So first, a little bit of background about how the Russian system works: When the Soviet Union broke up, they had a lot of big fields that were being tapped, not necessarily to generate the most money, but just because the Soviet system didn’t value efficiency.
There were a series of pipelines that started in northwest Siberia, traced southwest and west to eventually getting to three specific locations.
The first one is a major pipeline system which goes through Belarus and Ukraine and into Poland and then on to Germany.
The second one is a pipe that terminates near St. Petersburg that finally came online in the post Cold War era at a place called Primorsk. So it’s on the Baltic Sea.
And the third one goes to a preexisting super port, Novorossiysk, which is on the Black Sea.
All of these are gonna get shut down.
Now some people say, “Just send the oil to China.”
But the fields that supply the Asian routes are not connected to those pipelines, and the Russians can’t operate any of the projects that would create the links.
And linking the western infrastructure to the eastern infrastructure would require a series of pipelines that are longer in the distance from Anchorage, Alaska to Miami through largely virgin terrain.
That’s a 10-year project. That’s a $50 billion project minimum, assuming nothing else goes wrong.
So not only are we looking at a collapse in Russia’s ability to send crude west, we’re looking at a slower collapse in Russia’s ability to send its preexisting flows south to China. That’s going to weaken over time, and don’t think that the Chinese can come in and take care of this for the Russians, because the Chinese are even worse at oil tech than the Russians are.
