Cheap oil for Asia: Russia will ship its oil from Novorossiysk on the Black Sea, to Ashkelon in Israel, through the Tipline to Eilat and then ship again from the Red Sea to AsiaPosted on 1/17/2004, 8:15:47 AM by Destro
Monday, 21 July, 2003
Russia sidesteps Arab oil
by economics editor Hans de Vreij, 18 July 2003
Cheap oil for Asia: Russia will ship its oil from Novorossiysk on the Black Sea, to Ashkelon in Israel, through the Tipline to Eilat and then ship again from the Red Sea to Asia
In a major new development, Russia will soon begin supplying the Asian markets with crude oil, effectively breaking the near-monopoly that Saudi Arabia and the Gulf States have held for years. A pipeline running straight through Israel will transport the oil from the Mediterranean to the Red Sea. One of the practical consequences is that Asian consumers will soon pay less for petrol and heating oil, but there will also be wider strategic ramifications.
Asian buyers pay a lot, relatively, for their crude oil. The Arab producers on the Persian Gulf can set higher prices for exports to Asia, because there are few alternatives. Sending supertankers around the Cape of Good Hope is expensive, and the Suez Canal in Egypt is not an option; the Egyptian authorities do not allow the really big tankers to sail through the Canal. The result is that Arab oil sellers, in particular Saudi Arabia, charge customers in Asia an average of two US dollars extra per barrel.
Reversed line
Now, Russia will start supplying the Asian markets with up to one million barrels a day, using a pipeline that runs from the Israeli port Ashkelon on the Mediterranean coast to Eilat on the Red Sea. The ‘Trans-Israel Pipeline', or Tipline, has been used in the past to pump relatively small quantities of Egyptian crude oil from Eilat to the Mediterranean.
But since the second Palestinian Intifada began in 2000, these exports have virtually stopped for political reasons. Under a deal concluded between Israel and Russia last year, the pipeline has now been upgraded and made ready for two-way traffic. This week, an Indian tanker in Eilat was filled with the last remaining Egyptian oil left in the pipeline and associated storage facilities. Russian crude oil will soon start flowing.
With the exception of the Arab oil producers, all parties involved will benefit from this new supply line. Asia will pay less for its oil, and Israel will become less dependent on Arab supplies and in addition earn money through the transit fees for the Russian oil.
Russian foothold
Russia itself has finally found a way to ship its crude oil from terminals in the Black Sea to customers in Asia in large quantities and at competitive prices. This will strengthen its position on world energy markets, where it has already become a major player. Russian products, mainly natural gas, now meet a third of Europe's energy needs.
From a political point of view, the deal strengthens ties between Russia and Israel. It also sidesteps Saudi Arabia, which will be applauded by the US and other Western nations. For its part, Russia is no great friend of Saudi Arabia either, suspecting political groups in that country of providing financial and other aid to armed insurgents in Chechnya, just as the West sees ties between Saudi factions and the al-Qaeda network. In this sense, the new Russian oil supplies to Asia have far wider ramifications than merely lower fuel prices for the car owners of Asia.
IOW, BTTT!
a) Russia will make some money that she could find a use for.
b) Rag heads will learn hard way that Mohammed or what's his name hadn't arranged them with an eternal sinecure.
c) The amount of good in the world will increase.
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