Salem Radio Network News Wednesday, February 1, 2023

World

The Media Line: Tunisia Capitalizes as New South Korean Route for Russian Oil Imports

Tunisia Capitalizes as New South Korean Route for Russian Oil Imports

Middleman in Russian naphtha trade opens door for Westerninvestment

Debbie Mohnblatt/The Media Line

South Korea, the largest naphtha importer worldwide, seems tohave found a new route to buy Russian hydrocarbon productsthrough Tunisia. These transactions could be highly beneficialfor the North African country, despite the criticism they couldbring.

Seoul has begun importing large amounts of naphtha, a liquidhydrocarbon mixture similar to gasoline, from Tunisia.Meanwhile, the North African countrys imports of the sameproduct from Russia have soared dramatically, Reuters reportedon Thursday. It also cited Fakhta Mahouachi, the head of theTunisian state refiner, La Société Tunisienne des Industries deRaffinage, saying the naphtha stored in their port belongs toforeign companies and the state is not connected to thetransactions.

According to Refinitiv, one of the world’s largest providers of financial markets data and infrastructure, South Korea last year imported 590,000 tons of naphtha from Russia. Last month, according to the Korean National Oil Corporation, it imported 82,000 tons of the same product from Tunisia, which represents a significant increase in Korean naphtha imports from the tiny North African nation in recent years.

Tunisia is taking the role of intermediator for these transactionsdespite the Wests sanctions against Russia due to its invasion ofUkraine. On this matter, Ahmed Alqarout, lead MENA analystat Sibylline, says that, regardless of the criticism that it mayattract, it could be rather beneficial for the country.

On the one hand, he told The Media Line, Tunisia is seeking toget the Wests attention by capitalizing on its rivalry withRussia, in a bid to secure more Western investments and aid.

Alqarout argues that Tunisia’s role on this trade route is likely to increase tensions with and criticism from the West but could ultimately lead to talks and negotiations that may result in the foreign investments that the country’s economy desperately needs.

Tunisia, he points out, is currently struggling economically, and despite securing further funding from the International Monetary Fund and the European Union, its fiscal deficits continue to soar, meaning that the country spends more than what it earns. This, he adds, “is driving significant societal unrest in the run-up to the elections scheduled next month.” In the meantime, he adds, Tunisia is seeking to create a new revenue stream by facilitating Russia’s hydrocarbon products to countries that do not desire to challenge the West.

James Swanston, an emerging markets economist at CapitalEconomics, specializing in coverage of the Middle East andNorth Africa, agrees. He told The Media Line that Tunisia,acting as an intermediator, is likely a reflection of the countrysdesperation for sources of revenue to counter its deterioratingeconomic situation.

“Tunisia is in need of hard currency to try and help avert a messy balance of payments crisis,” he says, pointing out: “The benefit to Tunisia in this is that it is presumably taking a cut of the trade deal, which helps in its acute economic problems.”

Alqarout says that, given the current disruption in the globalenergy market, many world governments are trying to find thebalance between complying with Western sanctions and meetingtheir national needs for energy. He notes: At the current worldproduction capacity, storage, and prices, many countries stilldeem Russian energy as the most affordable option and arelikely to continue to import from Russia, especially in Asia.

Swanston says that South Korea might be testing this route through Tunisia as a third party, to maintain this balance. He adds that, while there are not presently second-round sanctions for dealings with Russian hydrocarbon exports, Korea could be exploring this as a method to possibly avert sanctions if they were to be imposed in the future.

Alqarout notes that Tunisia is an optimal option to become atrade route for Russian hydrocarbon products due to RussiasMediterranean Sea facilities and Tunisias proximity to them.This, he says, allows it to become a potential hub and traderoute for other countries interested in benefiting from anarrangement that enables sanctions maneuvering.

On the other hand, Swanston says that the energy crisis that theWest is dealing with is likely to see some relief in 2023, asenergy prices fall back. OPEC+ currently has a cautiousapproach to oil production quotas, but we think that the currentagreement will not last its duration to the end of next year, andquotas will be raised sooner rather than later. This will putdownward pressure on prices.

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