On July 6, the Valdai Club hosted a discussion titled “War, Sanctions, Supply and Demand: Oil Markets After the Gulf Crisis.” Moderator Ivan Timofeev posed a series of questions to the panellists regarding the fragility of the current truce and its impact on oil markets: to what extent has the cessation of hostilities influenced prices, what are the prospects for a sustained return to pre-crisis price levels, how are market players hedging their risks, and can Russia leverage the current environment to its advantage?
Konstantin Simonov, CEO of the National Energy Security Fund and head of the Political Science Department at the Financial University under the Government of the Russian Federation, argued that a full restoration of the pre-war status quo in the oil market is highly unlikely. He observed that the events in the Strait of Hormuz had made it clear that the modern oil market rests on “three whales”—players that claim regulatory authority and possess the capacity to influence prices through their actions. The first “whale”, which has been steadily gaining weight in recent years, is the United States. In Simonov’s view, the crisis has served as an additional bid for US dominance in the global oil market. Although many perceive America as a loser in geopolitical terms, from an energy standpoint it has emerged victorious. Washington leveraged the war to boost exports, presenting itself as a reliable major supplier capable of guaranteeing delivery to buyers. Moreover, the US has not only showcased its strength but also exposed the vulnerabilities of its rivals—demonstrating a willingness and ability to “push them aside” through both military means and sanctions. For the United States, Simonov suggested, the war has become a kind of “water tap” that it can turn on and off as policy dictates.
The second “whale”, which, conversely, has been losing weight in recent months, is OPEC+, of which Russia is a member. Although its market share is declining and it faces considerable internal challenges, the group still controls roughly 40 percent of global supply. The third “whale”, whose importance was underscored by the Hormuz crisis, is China—a major consumer that has proven its ability to sway the market from the demand side. China is expected to surpass the United States in oil consumption in the near future. During the crisis, Beijing demonstrated that, if necessary, it could draw down its strategic reserves and sharply reduce imports without causing significant domestic disruption. This became a major factor in containing global price increases, which ultimately rose far less than many had anticipated.
Amit Bhandari, a research fellow in energy and environment at Gateway House, offered the Indian perspective. In his view, the global market currently enjoys a “comfortable surplus” of oil, which largely shapes the actions of the United States and other key players. Due to this oversupply, OPEC has lost much of its market-regulating power—a development that benefits India as a net oil importer. Turning to sanctions risks, Bhandari warned that the United States, having failed to achieve its political objectives during the conflict, is likely to expand its sanctions regime. Officially, most non-Western countries, including India, reject these measures as illegal; yet their commercial enterprises must operate within the constraints of financial reality. Given that the United States remains the backbone of the global financial system, businesses are compelled to monitor Washington’s decisions closely. Overall, Bhandari observed, the Indian government is actively exploring various avenues to reduce its dependence on oil imports and on oil itself, though with limited success so far. He predicts that over the next fifteen to twenty years, India will continue to rely primarily on imported crude.
Thu Anh Tuan, a senior research fellow at the Institute of Strategic Studies at the Diplomatic Academy of Vietnam, contended that Vietnam, like many other oil-importing nations in Asia, is suffering from the current turmoil. The war has disrupted global oil supplies, harming countries not directly involved in the fighting. The Strait of Hormuz crisis dealt a severe blow to Vietnam’s energy sector, which historically sourced 80 percent of its crude oil from Kuwait. This disruption drove up prices, including for consumer goods, and exposed Vietnam’s lack of a strategic petroleum reserve, which it had failed to establish in advance. The aviation sector was also hit hard. Moreover, the energy shock fuelled inflation, undermined imports, and—most critically—hurt exports, on which Vietnam heavily depends. Similar challenges were felt throughout the region. Thu Anh Tuan concluded that Asian nations need to consider building their own reserves, diversifying away from over-reliance on any single currency or trading partner, learning to navigate sanctions regimes, and fostering greater regional solidarity.
The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.
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