Russia oil prices low and restricting access to international

Russia is an extensive, resource-rich country, with immense diversity. The Russian economy has been operating by keeping oil prices low and restricting access to international financial markets. However, the economy is gradually growing and a moderate growth rate is projected by rising oil prices, macroeconomic stability, and improved investor confidence. The large country has massive oil reserves underneath the expansive Siberian plains, attributing to them being the second-largest crude (unrefined) oil exporter by volume. Since the fall of the Soviet Union, Russian oil output has severely declined. However, in the past several years the nation has completely rejuvenated its oil industry and will likely continue to increase its oil reserves through further exploration into the arctic waters. Russia’s extreme oil reserves, oil production, and oil pipeline network collectively and efficiently deliver to the Middle East and Europe (“The World Bank in Russia”, 2017).The Druzhba pipeline is the world’s longest oil pipeline and is one of the largest sections of Russia’s oil pipeline; it begins in central Russia and connects West Siberian oil fields to major oil refineries in Europe. The word “druzhba” in Russian translates to ‘friendship’, exhibiting a sense of alliance and partnership through Europe and Russia, made possible through the pipeline. The massive pipeline splits into two legs; with the larger one (the northern leg) traveling to Poland and Germany. Meanwhile, the smaller leg extends to various parts of Europe, such as the Czech Republic and Slovakia. The massive pipeline has a capacity of over 2 million barrels per day, of which some 1.2 million barrels per day travel directly to consumers in the European Union, while around 400,000 stay in Belarus. In 2008, Germany received around 350,000 barrels per day of crude oil via the Druzhba pipeline. This number is around under 15 percent of its total consumption. Refineries belonging to Shell and BP are among the biggest buyers of crude from the Druzhba pipeline (“Russia’s Druzhba Oil Pipeline to Central Europe”, 2009). Russia’s economy is highly dependant on energy exports: oil and natural gas revenues account for sixty eight percent of the country’s total export value in 2013. Based on data from the Federal Customs Service of Russia, in 2014, Russia exported more than 4.7 million barrels of crude oil every day. Russia has over twenty ports that are utilized as export outlets for hydrocarbons to various markets in every continent around the world .Still, around 85 percent of Russia’s crude exports are transported by sea. ‘Novorossiysk’ is Russia’s main oil terminal on the Black Sea coast; its load capacity is over one million barrels per day. Ninety eight percent of Russia’s crude oil exports go to Europe and Asia. Europe, which depends on Russia for more than thirty percent of the region’s oil supply, accounted for 72% of Russian oil exports (“Russia is World’s Largest Producer of Crude Oil and Lease Condensate”, 2015).There are several major aspects which have changed the basics of Russia’s approach to this market. One of the factors is the crisis in European refinery industry, due to weak demand and increased competition of product supplies from refineries in other parts of the world. This primarily includes Asia and the United States. However, the Middle East is also attributing to this competition. Another factor is the changed tax system in Russia. The changes to the law came into place at the beginning of 2015. The changes reduced crude oil export functions while increasing the mineral extraction tax. However, export duties for diesel and other light products were kept at sixty three percent of those for crude. The main ramification is refiners now have an incentive to maximize their light-product output and exports, thus prioritizing crude oil for European refineries less.Additionally, the nature of the oil trade is changing; it is not the crude oil trade but refined products trade that has central meaning for the globalization of trade flows in the medium-term perspective. Therefore, such players as Saudi Arabia and Russia are instead focusing on developing their own refinery capacities and taking over their positions in the products markets. Importantly, the end-markets for their output are located in Asia, rather than the stagnating European market.The recent developments in the Middle East, which has seen increased production from fields controlled by ISIS, signify a serious change – a birth of the new geopolitics of oil where non-state actors have increasing importance. As a result, the notions of sovereignty over national resources, traditional trade barriers associated with national borders and trade legislations, and energy diplomacy all acquire a very different context (Mironova, Irina, and Aaron Wood, 2015).