Although the world's largest oil producer has repeatedly said it has no plans to cut supplies to European markets, evidence is growing that it is focusing on supplying Northwest Europe, the Pacific and a soon-to-be-pumping pipeline to China to the detriment of Black Sea and Central European routes.
This is not so much of a long-term problem for the Black Sea and Mediterranean markets, which will become less dependent on sour and heavy Russian Urals grades as production grows in Kazakhstan and Azerbaijan, whose sweet and light grades will become dominant, traders predict.
But for Central Europe, the problem of dwindling Urals supplies may prove more difficult to tackle. German refineries rely on crude from the Druzhba pipeline to such an extent that the issue might ultimately become of major concern to German politicians.
"We are witnessing a tectonic shift, and foreigners become very worried. It sounds crazy for now, but we may end up by having Germany and Poland importing crude from the Baltic Sea instead of Druzhba," one major Russian trader said.
Ten years ago when Russia launched Primorsk, its first oil port in the Baltic, in order to cut reliance on transit via former Soviet Baltic republics, few traders would have dared to predict the route would replace the Black Sea as the main export channel.
Plans for large exports to Asia by the then-President Vladimir Putin had seemed a dream if not a fantasy.
Primorsk vs. Novorossiysk
A decade later, Primorsk is now Russia's biggest port with exports of 1.55 million barrels per day (bpd), while Kozmino on the Pacific has ramped up exports to 360,000 bpd from scratch two years ago.
Meanwhile, combined exports from Black Sea ports including Russia's Novorossiysk and Ukraine's Yuzhny and Odessa are running as low as 700,000 bpd during some months or less than half of combined capacity.
In the long term, Russia plans to export as much as 1.6 million bpd to the Pacific and Asia, including through a newly built link to China, due on stream in January.
Jonathan Kollek, vice-president for trading at TNK-BP, Russia's No. 3 oil firm, which is half-owned by BP, said the shift from the Black Sea and Druzhba to Asia and the Baltic would continue.
"Novo(rossiysk) will dwindle, while the Baltic will pump at full capacity. Novo and Druzhba will be marginal plays to some extent, but you will see flows of products through Novo increasing," he told Reuters.
Peter O'Brien, vice-president at Russia's largest oil producer Rosneft, said the extent to which flows will shift to Asia from Europe would depend on Russian tax policies on production and exports from different regions.
"It is a function of which production you have in, say, five years," says O'Brien, whose company dominates East Siberian production and is pressing the government for more tax breaks to enable it to export more to Asian markets.
O'Brien also noted that some of the proposed changes in taxation may discourage refining, which would free up more crude volumes for exports.
Merkel 'should call Putin'
Russian oil output has repeatedly pleasantly surprised markets in recent years.
Traders say Moscow would have had enough crude for both Europe and Asia if it were not building a new major Baltic port at Ust Luga. Like Primorsk, Ust Luga is also located near St. Petersburg, the home town of Putin, now prime minister and still Russia's most influential politician.
It is due to start next year and ultimately ship up to half a million barrels per day of crude to European markets.
"With the Chinese pipeline due to start any day and the launch of Ust Luga, I'm wondering if we will witness the death of Druzhba. Merkel should call her 'friend' Putin to figure out what's going on," one trader with a Russian major said.
Putin has repeatedly criticised the European Union's stated aim to diversify away from Russian oil and gas after disputes between Russia and its neighbours led to cuts in flows.
Ust Luga and the Chinese pipeline are not the only factors affecting future exports as the country expands its refining capacity, despite the proposed changes in taxes.
Oil firm Tatneft launched Russia's first major post-Soviet refinery and is seeking to regain control of Ukraine's Kremenchug, which now often sits idle.
"If Tatneft gets Kremenchug, there will not be much volume left for the Black Sea. That will make Mediterranean markets very volatile and people will have to get used to constant arbitrage between the saturated Baltic and the hungry south," one major Urals trader said.
(EurActiv with Reuters.)