European traders and refiners confirm that Saudi Arabia has been offering its oil at significant discounts, making it more attractive than Russian crude. And, even though most eastern European refineries are now technologically dependent on the Russian crude mix, Russia’s oilmen are right to be worried.
In the 1970s, Saudi Arabia sent half of its oil to Europe, but then the Soviet Union built export pipelines from its abundant West Siberian oil fields, and the Saudis switched to Asian markets, where demand was growing and better prices could be had. The Saudi share of the European crude market kept dropping; in 2009, it reached a nadir of 5.9 percent. Russia’s share peaked at 34.8 percent in 2011. In recent years, Saudi Arabia slowly increased its presence, reaching a 8.6 percent share in 2013, but it had never tried its luck in Poland.
Like most of central and eastern Europe, Poland has long been a client of Russian oil companies. Last year, about three-quarters of its fuel imports came from Russia, with the rest from Kazakhstan and European countries. Poland, however, is at the center of efforts to reduce the European Union’s dependence on Russian energy. Since Putin annexed Crimea from Ukraine last year, Poland, Ukraine’s neighbor, has increased military expenditures and other efforts to shore up its security. It’s working with its smaller neighbors, too. On Thursday, it announced an agreement with Lithuania, Latvia and Estonia to build a natural gas pipeline to and from the Baltic States, ensuring their future independence from Russian gas supplies.
In this context, a new and reliable supplier is a godsend. As for the Saudis, they need to expand outside Asia where demand is falling.