By Trixie Yap and Florence Tan
SINGAPORE (Reuters) – Western sanctions against Russia are driving the BRICS grouping of countries closer together in addition to curbing Moscow’s oil revenue, some executives at a major Asia energy conference said.
Sanctions imposed by the Group of Seven and other western countries in the aftermath of Russia’s invasion last year of Ukraine have capped Russian energy revenues and forced a drastic re-drawing of the global energy map.
“Western sanctions on Russia are working … In the sense that they’re creating less or lower revenues,” Russell Hardy, chief executive of Vitol, the world’s largest independent oil trader, told the Asia Pacific Petroleum Conference (APPEC) in Singapore on Monday.
“The flip side of sanctions is that it is creating stronger bonds between BRICS countries … So I think that’s a very negative aspect,” he added.
The BRICS – Brazil, Russia, India, China and South Africa – invited Iran, Argentina, Saudi Arabia, the United Arab Emirates (UAE), Ethiopia and Egypt into the club during a summit last month in Johannesburg.
Since the imposition of sanctions, India and China have drastically stepped up imports of Russian oil and have used currencies other than the dollar to pay for it, as the BRICS grouping seeks to challenge the dollar’s dominance, with China in particular keen to widen use of its renminbi.
“Everybody is irritated by the U.S. government, the U.S. Treasury sanctioning … So people say is there any way to create a counter-force, counterbalance to G7 or G20? BRICS is the candidate,” Fereidun Fesharaki, chairman of the FGE energy consultancy, told the event.
However, he said, an expanded BRICS grouping would not replace the dollar, noting, for example, that the currencies in Saudi Arabia and the UAE are pegged to the dollar.
“Nobody can replace the U.S. dollar,” he said.
The G7’s price cap on Russian oil is effective in limiting Russia’s revenue and oil supplies, a senior U.S. Treasury official told the conference, even as market data shows that most Russian crude and fuel exports from the Baltic and Black Sea regions are sold above the $60 cap.
“Over the course of the past year, we feel very good about where we are,” said Eric Van Nostrand, acting assistant secretary for economic policy at the U.S. Department of the Treasury, with respect to the price cap limiting Russia’s revenue while keeping oil supplies flowing.
“We want to extract that natural resource (out of Russia)… but to do so while limiting (President Vladimir) Putin’s revenue as best we can.”
(Reporting by Florence Tan and Trixie Yap; Writing by Tony Munroe; Editing by Alexander Smith)
