Southeastern Europe to face potential supply risks with EU ban on Russian refined products

The European Union's import prohibition on refined petroleum products derived from Russian crude takes effect Jan. 21, with northwestern European markets expecting minimal disruption while southeastern Europe faces greater exposure, according to market participants.

A northwestern European distributor indicated "no real impact" from the regulation, as many suppliers avoided materials originating from Russian crude but said the measure "may impact southeastern Europe more so than Northwest Europe, as Russian crude-derived materials entered Europe via the Turkey-Romania corridor."

Article 3ma of EU Regulation 833/2014 bans the purchase, import or transfer of Russian-origin refined products into the 27-member bloc, with limited exemptions for designated partner countries. The measure specifically targets petroleum products under CN code 2710, which contain Russian crude oil classified under CN code 2709.

The prohibition extends the G7 oil price cap framework by targeting circumvention routes that enabled Russian crude to reenter European markets through third-country processing facilities.

While the EU banned direct Russian crude imports in December 2022 after Russia's invasion of Ukraine earlier that year, refined products continued flowing through complex trading chains involving non-EU refineries.

Geographic vulnerabilities

The regulatory impact creates distinct geographic vulnerabilities, with southeastern European markets facing greater exposure to supply chain disruptions compared to northwestern regions that have established alternative procurement networks.

The "Turkey-Romania corridor" has served as a pathway for Russian-origin materials, making southeastern Europe particularly susceptible to the new restrictions.

"In Europe, some aliphatic producers we are aware of are known to source Russian feedstock," a hydrocarbon solvents trader said.

The restrictions could particularly affect hydrocarbon solvents segment, "especially for all the products that are passing through into Turkey," a distributor said.

Under the new framework, EU customs authorities will require enhanced documentation proving the origin of crude oil used in refining processes. The regulation includes exemptions for certain partner countries, though specific details on qualifying nations remain under review by the European Commission.

Beyond commodity classifications

Market participants emphasized that compliance extends beyond commodity classifications.

"CN code alone does not prove the origin of the crude," a trader said. "The only way to fully mitigate any risk is to obtain an official declaration of non-Russian origin from each of our suppliers."

Meanwhile, European gasoline blendstocks such as MTBE remain exempt from CN code 2710 restrictions, as MTBE falls under CN code 2909.

The European market has remained "selective as to which producers they work with" regarding Chinese-origin imports, a trader added.

"Purchase contracts were becoming very elaborate to ensure guarantees that MTBE imported isn't originated from Russian crude," another trader said.

European buyers continue to ensure that regular Chinese MTBE imports contain no traces of Russian-origin crude, demonstrating market-driven compliance measures prior to the regulation.

The comprehensive framework represents the EU's latest expansion of energy sanctions since the initial crude oil embargo.