00:00Let's talk more about that U.S. decision to lift sanctions on Russian oil.
00:04Christoph Ruhl is Senior Research Scholar at Columbia University's Center on Global Energy Policy
00:10and also a former Chief Economist for BP.
00:15Christoph, welcome.
00:16The United States temporarily lifting sanctions on Russian oil at sea.
00:22What's the importance of that distinction at sea?
00:27It matters in at least two respects.
00:30First, as your correspondent has already mentioned, it will help to fill Russia's war chest.
00:35You have to look at the situation on oil markets before the war started.
00:39In that particular angle of the oil market, Russian exports was in trouble for two reasons.
00:44Because oil prices had come down and were falling because the world was very well supplied with oil.
00:50It still is, actually.
00:51So prices tell that cut into Russia's revenues.
00:55And secondly, the sanctions were starting to bite more seriously.
00:59The oil Russia could sell over the last two years or so went all to China and to India and
01:05a little bit to Turkey.
01:06And India had just under pressure from the U.S. said we will no longer take sanctions oil from Russia.
01:12And as a result, there was a huge fleet building up, essentially tankers sailing around on the high seas,
01:19trying to find a home for that oil.
01:21And now two things have happened.
01:23The U.S. has said, OK, fine, go ahead and sell it.
01:25And these tankers, now much quicker than without having a safe place to sell it, can go back to India
01:31and to other places to sell it.
01:32And secondly, over the last two weeks, the price of that oil has doubled.
01:36So whatever they're selling now will bring in twice the revenue it brought in, would have brought in before the
01:41war.
01:42And that is the biggest financial economic benefit for Russia.
01:46There is, one should not hide it, another benefit, which Putin was, Mr. Putin was quick to exploit when he
01:52suggested he may even sell to Europe.
01:54And that is that, of course, the Europeans are fuming because they are having these sanctions in place.
01:59And the U.S., by allowing Russia to sell its sanctions oil elsewhere, is undermining the sanctions regime just at
02:06a point where it seemed at least to have started to work.
02:10And to what extent will it really help address this energy squeeze caused by this conflict?
02:18It will help.
02:20But, you know, energy squeeze, I would be careful.
02:22So we again look at the market, how it was before the war and how it still is.
02:27There was, all oil analysts will agree, an excess supply, too much oil, more than the oil supply than demanded
02:35in the last, say, 6 to 12 months.
02:37There was a huge amount, as we have learned now, strategic storage in the European Union, in the U.S.,
02:44in Asian countries, importing countries.
02:47There was a massive, massive buildup of strategic petroleum reserves in China, which has, for many years now, always bought
02:56oil on the market, has taken the excess supply on board, has gotten Russian deliveries when the oil price was
03:02cheap.
03:02Nobody knows how big it is, but it's very large.
03:04So the oil market, by and large, is very well supplied.
03:08And, in fact, you look around the world, despite the fear of a disruption from the Strait of Hormuz or
03:13from burning oil facilities in the Middle East, there is no actual shortage.
03:18We have no physical shortage.
03:20There's no queues in front of gas stations anywhere in Europe.
03:23There's no people not getting heating oil anywhere in Asia or elsewhere.
03:28And the point of that is that it makes you wonder, why was it so important to put a lid
03:34on the prices by using such a heavy gun as a sanctions relief and the biggest release of strategic reserves
03:40ever by the International Energy Agency?
03:43And to my mind, the answer is that in this war, in this climate of uncertainty, there's more at stake
03:49than usual.
03:50The usual is that one says, okay, high oil prices are very bad because, A, they cause inflation, and that
03:56causes high interest rates and causes consumers to stop consuming because they have high energy bills and so on.
04:02B, they're bad because it directly hits the economic growth prospects when people spend less, and C, it may even
04:10affect adversely countries which are highly oil dependent.
04:13But this time, there's something else here, and that's something else is the global financial markets, because what we have
04:19is a global economy which performs very nicely, but financial markets, which are very exuberant, very highly priced, have taken
04:26off.
04:27And when you remember in your show and elsewhere, there was always already a lot of head-scratchings, and what
04:33will it lead to these markets to adjust?
04:35Is AI above this?
04:37Christophe, the clock is against us, I'm afraid.
04:39I have to jump in and interrupt you.
04:41I can listen to you all day, but we have to stop it there, I'm afraid.
04:44And it's great to have you back on the program.
04:46Christophe Ruhl, the Senior Research Scholar at Columbia University.
04:50Christophe Ruhl, the Senior Research Scholar at Columbia University.
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