On June 1 Russia’s new economic sanctions against Ukraine came in force. On April 18, three days before the second round of the elections, Russia announced that the sanctions against Ukraine will be expanded effective June 1, 2019
. The decision came in response to the sanctions against the Russian businesses
introduced by Ukraine a week earlier.
What’s banned? Kremlin’s ban comprises two lists. Exports from the first list are to be banned completely, while the products in the second list can be exported if licensed by the Russian Ministry of Economy. It actually introduces additional licensing. Thus, Russia has banned exporting crude oil and oil products to Ukraine as well as bitumen and other materials for road surface production.
Coal, gasoline, diesel fuel and liquefied natural gas are not subject to the ban. To export them a special license needs to be issued by the Russian Ministry of Economy.
How dependent on these supplies is Ukraine? According to Upeco company, Russia holds a considerable share in fuel supplies to Ukraine – 33 per cent. Ukraine’s domestic production covers 17 per cent of the oil product market, exports from Belarus cover 32 more per cent, exports from Lithuania – seven per cent, 11 per cent more come from other sources.
Ukraine does not import oil or gasoline from Russia that are part of the sanction list. The situation with the diesel fuel and liquefied gas is different.
It may hurt Ukraine should the problems with diesel fuel supplies arise.The difficulties may come if the Russian Ministry of Economy refuses to issue the licenses.
Will getting a license be problematic? Ukraine gets almost all of its diesel fuel from Russia’s “Rosneft” company that is partially state-owned. It is unclear at the moment how the situation will be unfolding. Yet it is clear that Russia expects that the Ukrainian fuel market will be destabilized with unmotivated demand, increase of prices from possible supply delays or manipulations of the market players.
Comment by the Head of the National Security and Defense Council of Ukraine. The restrictions on exports of oil and oil products to Ukraine effective June 1 that were introduced by Russia, may become a serious threat to the country, so that businesses need to get ready to diversify its supplies, said Head of the National Security and Defense Council Oleksandr Danylyuk speaking to the media on Friday. “There are problems stemming from the restrictions imposed by the Russian Federation coming into effect on June 1. It may possibly create serious threats to the country and we need to be prepared. Supplies of diesel, lubes and oil may possibly be restricted. These are all the challenges that we need to find a response to,” Danylyuk said.