The sanctions imposed by Europe and the US as a result of the Russian attack on Ukraine were originally intended to weaken Russia. It is disputed whether the planned weakening actually succeeded. However, it is undisputed that the sanctions have led to major changes in the oil market.
Before the attack on Ukraine, short transport distances were not the exception but the rule, because the longer the oil had to travel from producer to consumer, the higher its price. Currently, however, the origin of the oil or gas to be imported is more important than its price.
As a result, Russia today hardly supplies any oil to the European Union, but has meanwhile become the most important oil supplier for India and China. Saudi Arabia, on the other hand, is currently exporting more oil to Europe. With a view to the long-term development, the Saudis continue to rely on China because higher oil demand is expected from there.
Have the US and Europe marginalized themselves?
The originators of this development and at the same time one of its losers are the USA. Before the start of the war in Ukraine, they were in the advantageous position that almost all of their oil business was settled in US dollars. This supremacy is now crumbling tremendously, because Saudi Arabia’s oil company Aramco is increasingly going over to not only regulating oil sales with Asian countries in long-term contracts, but also to processing them in currencies other than the US dollar.
The United States is currently benefiting from the fact that they can now also sell their expensive liquid gas in Europe. But in the medium to long term there is a risk of a significant loss of power. This is already becoming clear in two places: the most recent agreement with Iran was brokered by the Chinese, while the USA was only left with the role of an uninvolved spectator.
Further evidence that China’s influence in the Middle East is growing is the fact that Saudi Arabia and the People’s Republic have agreed numerous deals in recent months that envisage the long-term processing of Saudi oil in China. The USA cannot like this either, because it binds the two countries even more closely together.