Www.tukkk.fi/pei/e Shipments of Russian Oil via the Baltic Sea: A source of integration or...

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Shipments of Russian Oil via Shipments of Russian Oil via the Baltic Sea: the Baltic Sea:

A source of integration or disintegration in Europe?A source of integration or disintegration in Europe?

Prof. Kari LiuhtoProf. Kari LiuhtoDirectorDirector

Pan-European Institute (PEI)Pan-European Institute (PEI)Turku School of Economics and B. A.Turku School of Economics and B. A.


NelijärveNelijärve22.5.200422.5.2004


Pan-European Institute Pan-European Institute (PEI)(PEI)

PEI was fPEI was founded in 1998, when two ounded in 1998, when two institutes were merged:institutes were merged:-- Institute for East-West Trade (est. 1987) Institute for East-West Trade (est. 1987) - - Institute for European Studies (est. 1989Institute for European Studies (est. 1989))

PEI is one of the leading academic research PEI is one of the leading academic research centres in its field in Northern Europecentres in its field in Northern Europe


Core ActivitiesCore Activities

PEI conducts high-quality academic and PEI conducts high-quality academic and applied researchapplied research

PEI monitors economic development in PEI monitors economic development in the Baltic Sea Rim and Russia the Baltic Sea Rim and Russia

PEI provides education and trainingPEI provides education and training

PEI carries out projects funded by PEI carries out projects funded by several organisationsseveral organisations


Research FocusResearch Focus

Economic and business development in the Economic and business development in the Baltic Sea regionBaltic Sea region

Economic relations between the EU and RussiaEconomic relations between the EU and Russia

FDI inflow and outflow from RussiaFDI inflow and outflow from Russia

Regional development in Wider EuropeRegional development in Wider Europe

SME development in eastern regions of the EU SME development in eastern regions of the EU and countries bordering the Union in the Eastand countries bordering the Union in the East


Economic MonitoringEconomic Monitoring

Currently PEI executes three monitoring Currently PEI executes three monitoring activities:activities:– Bimonthly review on the Baltic States and Bimonthly review on the Baltic States and

PolandPoland– Biannual review on the Kaliningrad regionBiannual review on the Kaliningrad region– Weekly business reporting concerning the Weekly business reporting concerning the

Kaliningrad region and St. Petersburg Kaliningrad region and St. Petersburg

New monitoring activity concerning New monitoring activity concerning Russia will be introduced in June 2004Russia will be introduced in June 2004


The role of the PEI in The role of the PEI in providing economic providing economic

informationinformation Operation philosophy:Operation philosophy: Objective (neutral)Objective (neutral) Transparent (website)Transparent (website) Fast (electronic mailing) Fast (electronic mailing) Free of charge (most of services)Free of charge (most of services) Events (high-level conferences)Events (high-level conferences) Frequent (several monitoring activities)Frequent (several monitoring activities) Education and training (academic and applied Education and training (academic and applied

in-house)in-house) Visit -> http://www.tukkk.fi/pei/eVisit -> http://www.tukkk.fi/pei/e


Development of Russian Development of Russian economy (GDP)economy (GDP)

GDP 2003 was $ 434 bn (MP) or $ 1450 bn (PPP)GDP 2003 was $ 434 bn (MP) or $ 1450 bn (PPP)a third of the growth due to high oil price in 2003a third of the growth due to high oil price in 2003

6,4

-8

-6

-4

-2

0

2

4

6

8

10

96 97 98 99 0 1 2 3 4e 5-7e

%

Sources: Bank of Finland


Russia’s Foreign TradeRussia’s Foreign Trade(EU25 accounts for ~ 50%)(EU25 accounts for ~ 50%)

Source: Bank of Finland

5460

68

8190 87

74 76

105 102107

134

43 4451

6168 72

58

4045

5461

75

0

20

40

60

80

100

120

140

160

92 93 94 95 96 97 98 99 0 1 2 3

$ b

illi

on

Exports Imports


Russia’s export structure Russia’s export structure in 2003in 2003

Crude oil and products

40 %

Natural gas15 %

Bas ic m etals11 %

Machinery & transport equipm ent

9 %

Chem icals7 %

Others18 %

Source: Bank of Finland


Russia – an oil economyRussia – an oil economy

* * reserves 5-10% of world (P/R-ratio reserves 5-10% of world (P/R-ratio 22)22)

** oil and gas ~ 25% of GDP (WP)oil and gas ~ 25% of GDP (WP)

* * over 50% of extracted oil exportedover 50% of extracted oil exported

* * 2nd largest exporter of oil in the 2nd largest exporter of oil in the world world

* * over 50% of Russia’s oil exports over 50% of Russia’s oil exports arrive arrive in the EUin the EU


Russian oil producers in Russian oil producers in 20042004

Yukos19 %

Lukoil18 %

TNK-BP15 %

Surgutneftegaz12 %

Sibneft8 %

Tatneft5 %

Rosneft5 %

Slavneft5 %

Bashneft3 %

Others10 %

Source: Troika Dialog

www.tukkk.fi/pei/ewww.tukkk.fi/pei/eSource: EU

www.tukkk.fi/pei/ewww.tukkk.fi/pei/e Source: EU


Russia’s crude exports in Russia’s crude exports in 20022002

Sea transportation

58 %

Druzhba pipeline

39 %

Railway3 %

Source: Russian Petroleum Investor


Oil transportation in Oil transportation in the Gulf of Finlandthe Gulf of Finland

0

20

40

60

80

100

120

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Tallinn

Vysotsk

Batareynaja

St.Petersburg

Primorsk

Porvoo

Million tonnes

Source: SYKE (2003)


Some oil terminals in the Some oil terminals in the Russia territory of the Baltic Russia territory of the Baltic

Sea RimSea RimPlanned capacityPlanned capacity

PrimorskPrimorsk up to 70 mt (by the end of the decade)up to 70 mt (by the end of the decade)St. PetersburgSt. Petersburg 16 mt (by 2005-2006)16 mt (by 2005-2006)Bukhta BatareinayaBukhta Batareinaya 6-15 mt (by the end of 2004) 6-15 mt (by the end of 2004) VysotskVysotsk 5-11 mt (by the end of 2004)5-11 mt (by the end of 2004)VyborgVyborg 1 mt (extension open)1 mt (extension open)Ust-LugaUst-Luga 5-6 mt (by 2010)5-6 mt (by 2010)VistinoVistino up to 10 mtup to 10 mtKaliningradKaliningrad up to 10 mtup to 10 mt

By the end of the decade, probably over 100 million By the end of the decade, probably over 100 million tonnestonnes


ConclusionConclusion

Russian oil shipments via the BS grow (risks Russian oil shipments via the BS grow (risks grow)grow)(Murmansk pipe uncertain – Arkangelsk port ?)(Murmansk pipe uncertain – Arkangelsk port ?)

Safety and stricter control measures needed Safety and stricter control measures needed

(VTMIS, double-hulled ships, on spot sanctions)(VTMIS, double-hulled ships, on spot sanctions) Public awareness in Russia should be Public awareness in Russia should be

influencedinfluenced Closer EU-Russian co-operation requiredCloser EU-Russian co-operation required Team play among Baltic countriesTeam play among Baltic countries


EpilogueEpilogue

Russian oil is a source of integration in Russian oil is a source of integration in Europe, Europe,

if it does if it does notnot represent an environmental represent an environmental threat in the Baltic Sea or elsewherethreat in the Baltic Sea or elsewhere

and and

if it is not used as a political instrument to if it is not used as a political instrument to obtain conservative goals of Russian obtain conservative goals of Russian foreign policy.foreign policy.

Www.tukkk.fi/pei/e Shipments of Russian Oil via the Baltic Sea: A source of integration or...

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