Research & Insights #42

Russia is an essential supplier of fertiliser to Europe
According to the CEO of Norwegian chemical company Yara, Europe is more dependent on Moscow for food than it was before the war in Ukraine. Indeed, EU Member States have replaced their dependence on energy with a dependence on fertilisers. The sanctions imposed on Russia and Belarus have forced European factories to operate with soaring gas prices, an essential ingredient in fertiliser production. Russia and Belarus used to supply 60% of the European Union’s fertilisers. Total nitrogen imports into the EU increased by 34% in the period July-June 2022-23 compared to the previous year, according to Eurostat, with Russian imports accounting for around a third of the total. Imports of urea, the world’s most widely used nitrogen fertiliser, have risen by 53%, doubling the volumes forecast for 2020-2021. Of this, 40% comes from Moscow. According to experts, it could take 15 to 20 years for Europe to phase out fossil-based fertilisers and switch to biological solutions.

20% of the world’s oil is traded outside the US dollar
Major emerging economies are starting to trade commodities without using the US dollar, in order to reduce their dependence on the United States. Russia and Iran have stepped up their sales of oil in alternative currencies to China and India, often at a discount. Brazil, the United Arab Emirates and even Saudi Arabia have recently taken steps to facilitate trade without using the dollar. According to Natasha Kaneva, head of global commodities strategy at JPMorgan Chase, the proportion of global oil bought and sold in currencies other than the US dollar has risen to around 20%. In 2023, Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan, stunned reporters in Davos when he expressed that the oil-rich nation was open to trading in currencies besides the US dollar for the first time in 48 years.

Russia’s Arctic LNG 2 to ship first tanker this month
Despite US sanctions, the Arctic LNG 2 project is expected to load its first tanker of liquefied natural gas (LNG) bound for Asia at the end of January, according to two industry sources. The LNG will be supplied to Asian LNG markets via the Northern Sea Route by a fleet of ice-class LNG carriers. The facility, located above the Arctic Circle, is Novatek’s second large-scale project and is part of Russia’s drive to more than triple its LNG production to 100 million tonnes by the end of the decade. Today, Russia is the fourth largest producer of seaborne LNG, behind the United States, Qatar and Australia. In November 2023, the United States imposed sanctions against Arctic LNG 2. Consequently, TotalEnergies recently announced it had initiated a force majeure process. No offtake of LNG from Arctic LNG 2 by the French company is planned in 2024.

Restrictions on import of Russian diamonds to G7

The G7 nations announced the introduction of restrictions on imports of

diamonds mined or processed in Russia effective 01 January, 2024. The G7 leaders agreed that a reliable mechanism for inspecting and certifying unprocessed diamonds will be created inside the G7 by 01 September, 2024. Boris Krasnozhyonov, head of Russian securities market research at Alfa-Bank, said that the sanctions were increasingly “cosmetic” and that the rough and polished diamond sector was “not resting on its laurels”. Companies faced with the pressure of sanctions will redirect the flow of goods to other locations. As a reminder, Russia accounts for around 35% of global rough diamond production and 40% of world reserves, according to the analyst.

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