North Africa cashes in on cheap Russian gas products amid Ukraine war
North African countries have been importing more discounted Russian oil and gas products, including diesel, in recent months, undermining Western sanctions on the country over its invasion of Ukraine.
Diesel exports to Europe from North Africa have seen a huge spike and at the same time Russian diesel imports to North Africa have risen sharply since Russian President Vladimir Putin launched his all-out invasion of Ukraine in February 2022, of according to data from a commodity firm. Kpler shared with Al-Monitor.
In March this year, Morocco imported the most Russian diesel in North African countries, shipping in 108,000 barrels per day (bpd), Kpler data shows. Tunisia and Libya are also active importers, followed by Egypt. North African countries have imported 257,000 bpd of diesel from Russia in March so far, the highest amount since the start of the war on Ukraine.
Egypt has been North Africa’s largest exporter of diesel to Europe since the conflict in Ukraine began, the data show. In March, it is expected to export 46,000 bpd to Europe, followed by Libya with 23,000 bpd.
“We are indeed seeing higher flows of Russian oil products to North African countries. While this is true in the case of oil products and especially in the case of gas oil, it is not happening in the case of crude oil,” Livia Gallarati, oil markets analyst at Energy Aspects, told Al-Monitor.
“Russian gas oil arrivals to North Africa have increased significantly since the end of last year, growing from an average of 20,000 bpd in the first half of last year to around 200,000 bpd in Q1 2023,” she said.
Morocco and Tunisia are the most active importers in the region, Gallarati said, noting that West Africa has also been importing more Russian gas oil since the war began.
“At the same time, Moroccan and Tunisian oil and gas exports have been increasing in recent weeks, suggesting that the countries may be re-exporting Russian volumes,” the analyst said. “Morocco has no active refining capacity and Tunisia has only one small refinery of 35,000 bpd (the Bizerte refinery).”
Having said that, we think these flows will help move some Russian volumes into the global market but we expect them to remain relatively limited in scale, especially if they hope to remain hidden from radar of Western authorities. Russia still needs to find other markets, for example in the Middle East and Latin America, for its gas oil. He will not be able to put everything in Africa,” said Gallarati.
The Wall Street Journal reported in February that analysts suspected the North African countries could be re-refining Russian oil and gas products and re-exporting them back to Europe.
Homayoun Falakshahi, a senior commodity analyst at Kpler, said it would not go so far as to say that North African countries are importing Russian diesel with the intention of exporting it back to European countries.
“I think this practice would be a bit risky in terms of sanctions,” Falakshahi told Al-Monitor. “While we see a large increase in diesel imports from Russia, we do not see a comparable increase in exports to Europe, although these have increased slightly. In these cases, I think what’s going on is that these countries are importing cheap diesel from Russia, and they’re exporting the excess amounts that these imports create at home.”
His company’s data appears to show Egypt as a major exporter of crude oil and LNG to Europe. However, the numbers are slightly skewed because the Egyptian volumes are all from the Middle East, mainly from Saudi Arabia, which are imported into Egypt and re-exported through the SUMED pipeline, Falakshahi said. The 320-kilometre pipeline runs from the Ain Sokhna terminal in the Gulf of Suez to the offshore port of Sidi Kerir in the Mediterranean.
In recent months European governments have been looking for alternatives to Russian gas and oil. EU foreign policy chief Josep Borrell visited Algeria earlier this month to promote stronger energy and security ties with Africa’s main gas exporter. About 90% of Algeria’s gas exports go to Europe. Italy has also tried to increase energy ties with Algeria in recent weeks.
On March 14, Morocco’s finance minister denied reports suggesting the country had banned imports of Russian gas and oil. Economy and Finance Minister Nadia Fettah Alaoui said Russian gas imports would account for 5% of Morocco’s gas in 2021, before rising to 9% in 2022, reflecting an increase since the start of the war on Ukraine. She said the average price of Russian gas reached 9,522 dirhams ($916) per ton, compared to 10,138 dirhams ($975) per ton from other countries. Members of the People’s Movement party opposed the import of Russian diesel and accused the government of avoiding Western sanctions.
Falakshahi told Al-Monitor in February that because Russia’s main crude blend, Urals, has similar specifications to most Middle Eastern crudes, it would make economic sense for some MENA countries to buy Russian crude imported and refined into products before being exported to Europe. that’s the “Russian stamp.”