IMPACT OF UKRAINIAN SANCTIONS ON RUSSIAN OIL FLOWS

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Context: Ukraine has recently imposed stricter sanctions on Russian oil company Lukoil, affecting the flow of Russian crude oil into the European Union (EU).

 Details

• In late June 2024, Ukraine added Lukoil to its sanctions list, which means Lukoil can no longer use Ukraine as a transit route for delivering crude oil to the EU.
• This move impacts several EU countries that still receive Russian oil via the Druzhba pipeline, which runs through Ukraine.
• The countries most affected by this decision are: Hungary, Slovakia, Czech Republic. Together, these countries imported about €2.6 billion worth of Russian crude oil in the first half of 2024. Hungary and Slovakia, in particular, are heavily reliant on this supply.

Ukraine ●Ukraine is bordered by Belarus to the north, Russia to the east, the Sea of Azov and the Black Sea to the south, Moldova and Romania to the southwest, and Hungary, Slovakia, and Poland to the west. ●In the far southeast, Ukraine is separated from Russia by the Kerch Strait, which connects the Sea of Azov to the Black Sea. ●The country is mostly flat, with mountainous regions like the Carpathians and Crimean Mountains accounting for only 5% of its land area. ●The country's major rivers flow northwest to southeast into the Black Sea and the Sea of Azov, with the Dnieper River being the longest and most significant.

Russia ●Russia is the world's largest country, it spans a vast expanse across eastern Europe and northern Asia, stretching across 11 time zones. ●The country features a wide range of environments, from deserts and semiarid steppes to deep forests and Arctic tundra. Russia is home to: Europe’s longest river: the Volga Europe’s largest lake: Ladoga The world’s deepest lake: Baikal The coldest recorded temperature outside the poles ●The population of Russia is diverse, there are over 120 ethnic groups in the country, each with its own languages and traditions.

Why Is This Significant?

• Energy Dependency
  • • Hungary: Relies on Russia for around 70% of its oil imports, with Lukoil supplying half of that. Hungary's oil imports from Russia have dropped by a third since the sanctions.
    • Slovakia and the Czech Republic: Also depend on Russian oil delivered through the Druzhba pipeline.
• EU Response
  • • European Commission: The Commission is investigating how Ukraine’s actions impact oil supplies to Hungary and Slovakia. They are examining current oil transit volumes, shipping entities, contracts, and alternative supply routes.
• Broader Implications
  • • EU Oil Imports: Overall, the EU has reduced its imports of Russian crude oil by 90% since the invasion of Ukraine. However, Hungary has increased its imports of Russian crude by 56% since 2021.
    • Alternative Supplies: Despite EU sanctions on seaborne Russian crude oil, some countries still receive oil via pipelines due to their geographical dependence.

Russian Gas Imports ●The EU has reduced its gas imports from Russia from 40% in 2021 to 15% in 2024. ●Countries like Austria, Hungary, and Slovakia are still dependent on Russian gas transported through Ukraine. However, the EU has not imposed an embargo on Russian gas, and it continues to be imported, with some gas being re-exported from Europe.

 What’s Next?

Potential Escalation

• Ukraine’s contract for Russian pipeline gas expires in December 2024, with no extension planned. This means Russian pipeline gas will stop flowing into Europe through Ukraine starting January 2025.
• Ukraine may impose further restrictions on oil flows from other Russian companies using the Druzhba pipeline.

 EU Mediation

• Hungary and Slovakia have requested the EU to mediate with Ukraine to address the impact of these sanctions. The EU is still assessing the situation and has not yet taken concrete steps to address the concerns.

 Impact of the Ukraine-Russia War on the World

• The war between Ukraine and Russia, which began in 2014 with Russia's annexation of Crimea and intensified with the full-scale invasion in February 2022, has had far-reaching effects globally.

Global Political Landscape

Increased Tensions and Alliances

• NATO and the EU: The war has strengthened NATO and the European Union's resolve to counter Russian aggression. Countries like Finland and Sweden have sought NATO membership for increased security.
• Global Alliances: The conflict has influenced global alliances, with Western nations supporting Ukraine through military aid and sanctions against Russia, while countries like China and India have maintained more neutral or supportive stances toward Russia.

Diplomatic Strains

• Russia-West Relations: The war has severely strained relations between Russia and Western countries, leading to increased diplomatic isolation for Russia.
• International Organizations: The UN and other international bodies have faced challenges in addressing the conflict and its consequences, including humanitarian crises and war crimes.

Economic Impact

Energy Markets

• Oil and Gas Prices: The war has caused significant fluctuations in global oil and gas prices. European countries, heavily dependent on Russian energy, have faced higher energy costs and have been seeking alternative sources.
• Energy Security: Many countries are working to diversify their energy supplies and increase investments in renewable energy to reduce dependence on Russian resources.

Economic Sanctions

• Russian Economy: Sanctions imposed by Western nations have targeted Russia's financial, energy, and defence sectors, leading to a recession, inflation, and a decline in living standards in Russia.
• Global Supply Chains: The war has disrupted global supply chains, especially for agricultural products and raw materials. Ukraine, a major grain exporter, has seen its agricultural production and exports severely affected.

Humanitarian Impact

Displacement and Refugees

• Mass Displacement: Millions of Ukrainians have been displaced internally or have sought refuge in neighbouring countries and beyond. This has created a significant refugee crisis in Europe.
• Humanitarian Aid: The international community has mobilized substantial humanitarian aid to support displaced persons and those affected by the conflict.

Casualties and Human Rights

• Loss of Life: The conflict has resulted in a significant loss of life and widespread destruction in Ukraine.
• Human Rights Violations: Reports of war crimes and human rights abuses have emerged, leading to calls for international investigations and accountability.

Security Dynamics

Military Spending and Arms Race

• Increased Defense Budgets: Many countries have increased their defence budgets in response to the perceived threat from Russia, leading to an arms race and a re-evaluation of military strategies.
• Arms Transfers: The conflict has seen a rise in arms transfers to Ukraine from Western nations, which has influenced global arms trade and military support dynamics.

Regional Instability

• Eastern Europe: The war has heightened security concerns in Eastern European countries, leading to increased military presence and preparedness in the region.
• Global Security: The conflict has also raised concerns about potential spillover effects and regional instability affecting global security.

Long-Term Consequences

Geopolitical Shifts

• Re-alignment: The war is reshaping global geopolitical alignments, with countries reassessing their foreign policies and strategic partnerships.
• New Alliances: Emerging alliances and strategic partnerships are being formed in response to the changing dynamics of global power.

Economic Resilience and Adaptation

• Diversification: Countries and businesses are adapting by diversifying their energy sources and supply chains to reduce vulnerabilities.
• Economic Strategies: Nations are re-evaluating their economic strategies to mitigate the impact of the conflict on global markets and economies.

Impact of the Ukraine-Russia War on India

Economic Impact

Oil and Gas Prices

• Rising Costs: The war has disrupted global oil and gas markets, leading to higher prices. India, as a major importer of energy, has faced increased costs for oil and gas, impacting transportation and industrial sectors.
• Alternative Sources: To mitigate this, India has sought alternative sources of energy and increased its imports from other countries.

Inflation

• Food and Goods: Higher energy prices contribute to inflation, raising the cost of goods and services in India. This affects the cost of living for ordinary citizens and can slow down economic growth.
• Government Response: The Indian government has implemented measures to control inflation and provide relief to affected sectors.

Trade Disruptions

• Export Challenges: The war has led to disruptions in global supply chains, affecting India's exports. Key industries like pharmaceuticals and textiles have faced delays and increased costs.
• Diversification: India is working to diversify its trade partners and seek new markets to reduce dependency on any single region.

Geopolitical Impact

Diplomatic Relations

• Balancing Act: India has maintained a neutral stance, advocating for dialogue and peaceful resolution. This balancing act involves managing relationships with both Russia and Western countries.
• Strategic Partnerships: India has strengthened its strategic partnerships with countries like the United States and those in the European Union while continuing its long-standing ties with Russia.

Defence and Security

• Military Supplies: India, which has historically sourced military equipment from Russia, is now exploring alternative suppliers to ensure its defence needs are met without disruption.
• Regional Security: The war has heightened security concerns in the broader region, prompting India to enhance its defence and strategic planning.

Humanitarian and Social Impact

Refugee Crisis

• Support for Refugees: India has offered humanitarian support and aid to Ukrainian refugees. While India has not been a primary destination for refugees, it has contributed to international relief efforts.
• Global Responsibility: India’s role in humanitarian assistance reflects its commitment to global responsibility and human rights.

Public Sentiment

• Media and Public Opinion: The war has been extensively covered in Indian media, influencing public opinion and awareness about global conflicts. This has led to discussions on India's foreign policy and global role.

Long-Term Strategic Effects

Energy Security

• Future Planning: The war has highlighted the need for India to enhance its energy security by investing in renewable energy sources and reducing dependence on volatile global markets.
• Investment in Alternatives: India is increasing its focus on alternative energy sources such as solar and wind power.

Global Influence

• Emerging Role: As a major global player, India's response to the conflict and its ability to navigate international relations will influence its role on the world stage in the coming years.
• Leadership Position: India is positioning itself as a key player in advocating for peaceful resolutions and contributing to global stability.

Conclusion

• The Ukraine-Russia war has had profound and wide-ranging effects on the world, influencing political relations, economic conditions, humanitarian situations, and global security dynamics. The conflict has highlighted vulnerabilities and prompted significant changes in how countries approach energy security, military preparedness, and international cooperation. As the situation evolves, the long-term impacts will continue to shape global affairs.

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Source:

Indian Express

Britannica

Britannica

PRACTICE QUESTION Q. Evaluate the geopolitical consequences of the Russia-Ukraine war for India’s foreign policy. How has the conflict shaped India's relations with key global players and its stance on international organizations?