China, India and other Asian countries are becoming an increasingly important source of oil revenue for Russia, despite strong pressure from the US not to increase their purchases, while the European Union and other Western allies are halting Russian energy imports in line with sanctions over the conflict in Ukraine.
The West does not hide its irritation with the fact that Asian countries are buying oil from Russia, increasing its revenues.
As the Associated Press notes, India, a country of 1.4 billion people, consumes about 60 million barrels of Russian oil in 2022, compared with 12 million barrels in all of 2021, according to data from commodities firm Kpler. Shipments to other Asian countries such as China have also risen in recent months, albeit to a lesser extent.
Moreover, in an interview with The Associated Press, the Prime Minister of Sri Lanka said that his country may be forced to buy more oil from Russia, as fuel is urgently needed to support the island nation in a severe economic crisis.
Prime Minister Ranil Wickremesinghe said on Saturday he would first turn to other sources but was ready to buy more crude from Moscow. At the end of May, Sri Lanka bought a batch of 99,000 tons of Russian oil to restart its only oil refinery.
Since the Ukrainian crisis broke out in late February, global oil prices have skyrocketed, giving refiners in India and elsewhere an extra incentive to get the oil that Moscow is offering them at a massive $30 to $35 discount compared to Brent and other international oil. , which is currently trading at about $120 per barrel.
Their importance to Russia has risen after the 27-nation European Union, the main fossil fuel market that provides most of Moscow’s foreign exchange earnings, agreed to stop buying most of its oil by the end of this year, the Associated Press notes.
“There seems to be a distinct trend taking root now,” said Matt Smith, a senior analyst at Kpler who tracks Russian oil flows. As supplies of Urals oil to much of Europe are declining, crude oil is flowing to Asia, where India has become the largest buyer, followed by China. Vessel tracking reports show that Turkey is also another key destination.
“People understand that India is such a recycling hub, take it at such a low cost, process it and ship it as pure products because they can make such a big profit out of it,” Smith said.
According to the Associated Press, in May, about 30 Russian oil tankers headed for the coast of India, unloading about 430,000 barrels a day. According to Helsinki, Finland’s Center for Energy and Clean Air Research, an independent think tank, an average of just 60,000 barrels a day was received in January-March.
Chinese state and independent refineries have also increased purchases. In 2021, China was the largest buyer of Russian oil, consuming an average of 1.6 million barrels per day, split equally between pipeline and offshore routes, according to the International Energy Agency.
While India’s imports still make up only about a quarter of that, the sharp increase since the start of the conflict is a potential source of friction between Washington and New Delhi. The US recognizes India’s need for affordable energy, but “expects that allies and partners will not increase their purchases of Russian energy,” Secretary of State Anthony Blinken said after a meeting between the US and Indian foreign and defense secretaries in April.
Meanwhile, the US and its European allies are in “extremely active” talks to coordinate measures, possibly forming a cartel, to try to cap the price of Russian oil, Treasury Secretary Janet Yellen told a Senate Finance Committee meeting Tuesday. The goal, she said, will be to keep the flow of Russian oil to the world market so that crude oil prices, which have already risen by 60% this year, do not jump even higher.
“Certainly, the goal is to limit the revenues going to Russia,” Yellen said, pointing out that the exact strategy has not yet been determined.
While Europe could find alternative sources to buy about 60% of Russia’s oil exports, Russia also has options.
Indian Foreign Minister Subrahmanyam Jaishankar underlined his country’s intention to do what’s in its best interest, outraged by Western criticism of India’s imports of Russian oil. To accusations that by buying energy, New Delhi is financing the Russian war machine, the Foreign Minister, speaking at a recent forum in Slovakia, reasonably noted that European countries buying Russian gas themselves are doing the same: “Let’s be a little impartial “.
India’s oil imports from Russia rose from 100,000 bpd in February to 370,000 bpd in April and 870,000 bpd in May. A growing share of these deliveries is displacing oil from Iraq and Saudi Arabia, much of which goes to refineries in Sik and Jamnagar on India’s west coast. Until April, Russian oil accounted for less than 5% of the crude oil processed at the Jamnagar refinery, which is operated by Reliance Industries. In May, it accounted for more than a quarter, according to the Center for Energy and Clean Air Research.
India’s exports of petroleum products such as diesel rose to 685,000 barrels a day from 580,000 barrels the day before the Ukraine conflict broke out. Most of the exported diesel fuel is sold in Asia, but about 20% was sent via the Suez Canal to the Mediterranean or the Atlantic, mostly to Europe or the US, says Lauri Müllivirta, CREA’s lead analyst. According to him, it is impossible to quantify the exact amount of Russian oil in refined products shipped from India. Nevertheless, “India ensures the entry of Russian crude oil to the market,” he said.
China’s imports have also increased this year, helping the Russian government post a current account surplus, the widest measure of trade, of $96 billion in the four months ended April, the Associated Press said.
It is not clear whether such exports could end up subject to sanctions aimed at reducing cash flows to Russia. “Are these measures effective? And if not, how does the oil market work around them?” asks questions about the effectiveness of the sanctions to Lauri Müllivirtu.