The United States can squeeze Russia’s oil profits, increasing pressure on the Kremlin and Russian President Vladimir Putin’s policies in Ukraine while, at the same time, supply Europe with oil, a leading analyst told New Europe on September 8.
Russian state-owned oil firms including Rosneft are reportedly on the new EU sanctions list. US sanctions already target Rosneft, which is the world’s biggest listed oil producer. The Russian major produces more oil than OPEC members Iraq or Iran.
Fadel Gheit, a senior oil and gas analyst at Oppenheimer in New York, argued that instead of sanctions, Washington should lift the ban on exporting US crude oil and supply Europe, reducing the EU’s dependence on Russia.
“The US is playing a stupid game because we could have made the same thing by lifting the ban on oil export. We have had a ban on oil export for 40 years. By just saying we will lift the ban I guarantee you that oil prices will come down, it will hurt Putin, it will help the global economy and it will definitely put Russia in a very weak spot,” Gheit told New Europe.
The Oppenheimer analyst said US President Barack Obama should have lifted the ban last month “to help our friends in Europe without even saying that is intended to hurt Putin and Moscow”.
“That would have brought prices significantly lower and that would hurt Putin and also we substitute Russian oil for American oil and therefore they will have to sell their oil to the Chinese at a cut-rate price. That’s what the Iranians are doing. So they will be competing with the Iranians and the black market,” Gheit said.
So why hasn’t the US done that already? “The refiners’ lobby in the US managed to fool and misinform Congress by telling that if the President lift the ban on oil export, oil prices will rise, gasoline prices will rise and that will hurt the low income people in the United States which cannot be further from the truth,” Gheit argued. “Because putting more oil in the global market, will lower the global oil price which is represented by Brent and that will reduce gasoline prices worldwide including in the US,” he added.
Benchmark crude oil prices fell to 15-month lows on September 8. October contracts for Brent crude oil fell below $100 for the first time since May 2013 and are trading at about $100.32 a barrel, while West Texas crude dropped 30 cents to near 2014 lows at $92.99 a barrel.
“Oil prices declined and the reason is because a lot of people are beginning say you cannot ban oil imports unless you have a fallback position,” Gheit said. “So this fallback position could be the biggest surprise and the President will say we will facilitate oil exports to our friends in Europe,” he said, adding that Saudi Arabia could also step up and increase its oil exports to Europe by 1 million barrels a day and the Organization of Petroleum Exporting Countries will follow suit. But Europe has to have a substitute first before it abandons Russian oil. “It’s like a circus: you don’t jump from one rope without having another rope to hang on,” Gheit quipped.
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