Major Raw Material Brokerage Firm Expected to Significantly Reduce Russian Crude Oil Transactions Starting Next Month on the 15th

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] Major global commodity trading firms plan to reduce their purchases of crude oil and gas from Russian state-owned energy companies as early as May 15, according to major foreign media citing sources on the 13th (local time).

Commodity trading firms intend to cut back on crude oil purchases from Rosneft, Gazprom Neft, and others in line with the EU's sanctions on Russia starting May 15. Gazprom Neft is Russia's third-largest crude oil producer and a subsidiary of Gazprom, the largest state-owned gas company in Russia.

In fact, crude oil purchases are exempted under the EU's sanctions. This is because some European countries, including Germany, strongly oppose the sanctions due to economic damage concerns. The EU has decided to exclude Russian crude oil from sanctions, considering it 'strictly necessary' to ensure Europe's energy security.

Regarding this, trading firms deliberated on how to interpret 'strictly necessary.' While Russian crude oil supplied to Europe via pipelines is undoubtedly strictly necessary and thus exempt from sanctions, it was ambiguous whether Russian crude oil traded through intermediaries would qualify for the exemption.

Ultimately, trading firms decided to reduce Russian crude oil purchases to avoid criticism of exploiting ambiguous wording as a loophole. Sources said the firms were concerned that trying to profit from Russian crude oil amid strong international criticism of Russia could damage their corporate image.

Trafigura, one of the major buyers of Russian crude oil, stated that it will fully comply with the Russian sanctions and that its Russian crude oil trading volume will further decrease from May 15.

Vitol previously announced that its Russian crude oil trading volume would significantly decrease in the second quarter due to reduced contracted volumes. Vitol also stated that it will completely cease Russian crude oil trading by the end of this year.