Welcome to our Multilateral view of the week. This week Dr Rebecca Harding takes you on a journey through Russian oil and explains why we have such a concern about Russia and what it is that’s underpinning an awful lot of what is going on.
The first thing to say is that Russia is not the world’s biggest trading partner until you start to look at its exports, and then all of a sudden it becomes important because the Russian Federation is a very large exporter of oil. The world is dependent on Russia to a very large extent. Our data shows that Russia is actually the second-largest exporter of oil in the world. This means that there’s a dependency on Russia and its supply of oil so that explains why we’re concerned about what is going to happen. If we look at how this is structured you’ll see quite clearly that Russian oil is very much related to energy supply and energy security in Europe.
Russian oil is exported to the Netherlands, Germany, Italy and Turkey but it’s also importantly exported to Belarus, Ukraine, Kazakhstan and increasingly across China as well.
What we’re seeing at the moment is a geopolitical conflict in the rawest sense of the word. This is all about resources, it’s all about how Russia controls our energy supply and how we manage our borders and our spheres of influence as a result.
From our data, we can see a couple of interesting things that are going on. The first focuses on Germany. Germany is very important as an export partner and the relationship between Germany and Russia will begin to influence the way in which this whole crisis evolves over the coming days and weeks. The other thing that’s really important here is to notice that China is increasingly important to Russia as well. Russia has to a large extent pivoted to the east. It started to supply China with oil and gas and that’s coming through a new pipeline, so the relationship between China and Russia is becoming not just a marriage of convenience which it has been in the past but an increasingly geopolitical and geostrategic one as well.
The other area that you’ll notice from looking at our data is ‘areas not elsewhere specified‘, and that is a group of countries that are all clustered together and nobody knows precisely who they are. Now a lot of Russian oil is under embargo, and it’s under restrictions. So this area ‘not elsewhere specified‘ is very important to watch as a trading partner because it’s basically the sanctions-busting trade that the country does.
I said Germany was important and let’s have a look at the reasons why. Looking at just Europe, you can see where the clustering of Russian exports to Europe is. It gives you an idea of the roots and where we are most reliant. This is just the EU27, but you can see Germany, the Netherlands, Italy and France all have a big stake in Russian oil supplies. But let’s focus particularly on Germany within that context. If we focus on Germany, and we look at who its biggest trading partners are, Russia is actually quite an important partner for both imports and exports, but for exports, the issue is specifically in cars.
If we look at Germany’s trade with Russia, Germany is exporting machinery and components, automotive electrical products and pharmaceutical products to Russia, while Russia is importing largely mineral fuels. You can see in our data just how dependent on mineral fuels Germany is. At a more detailed level, we can see that this specifically includes, oils, petroleum gases and also refined oil.
But let’s go back to the other area that’s of interest because we’ve heard a lot about troop builds up in Belarus, we’re hearing a lot about Ukraine at the moment, and obviously, a few weeks ago there was a conflict in Kazakhstan as well; an internal insurgency. Again you can see Russian influence in these areas, particularly around imports and of course exports of oil and gas to those countries. So geostrategically Russia’s sphere of influence in the Eurasia region and Europe is very important.
One last reason why else the world is worried and actually Russian imports and exports of military equipment. The reason why this is interesting is that if you look at Russia’s influence in terms of where exports are going, it’s not the picture that you would expect. You’ve of course got Algeria, but you’ve also got Syria, Azerbaijan, India and also a very important destination for exports; Venezuela. This is the reason why the USA from geostrategic perspective, is interested in making sure that it understands Russian intentions.
That’s a quick list of the reasons why everywhere is concerned about Russia and why there is a conflict at the moment.