India and other Asian countries are becoming an increasingly important source of oil revenue for Moscow despite strong pressure from the US not to increase their purchases as the European Union and other allies stop energy imports from Russia under sanctions due to its war with Ukraine. .
Such sales boost Russia’s export earnings at a time when Washington and its allies are trying to limit the financial flows that support Moscow’s war effort.
India, a country of 1.4 billion people, consumes about 60 million barrels of Russian oil in 2022, up from 12 million barrels in all of 2021, according to commodities firm Kpler. Shipments to other Asian countries such as China have also risen in recent months, but to a lesser extent.
In an interview with The Associated Press, Sri Lanka’s prime minister said he may be forced to buy more oil from Russia as he frantically searches for fuel to keep the country going through a severe economic crisis.
Prime Minister Ranil Wickremesinghe said on Saturday that 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 90,000 metric tons (99,000 t) shipment of Russian oil to restart its only refinery.
Since the Russian invasion in late February, global oil prices have skyrocketed, giving refiners in India and elsewhere an extra incentive to extract the oil that Moscow is offering them at deep discounts of $30 to $35 compared to Brent and other international oil. which is currently trading at around $120 a barrel.
Their importance to Russia has risen after the 27-nation European Union, the main fossil fuel market that provides much of Moscow’s overseas revenue, agreed to stop buying most of its oil by the end of this year.
“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 Turkey as 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.
In May, about 30 Russian oil tankers headed for the coast of India, offloading 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 per 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 maritime transport, according to the International Energy Agency.
While India’s imports still account for only about a quarter of that, the sharp rise since the start of the war is a potential source of friction between Washington and New Delhi.
The US recognizes India’s need for affordable energy, but “we expect allies and partners not to 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 said Tuesday at a Senate Finance Committee meeting.
The goal, she said, will be to keep Russian oil on the world market so that crude oil prices, which have already risen 60 percent 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 purchase about 60% of Russia’s oil exports, Russia also has options.
Indian Foreign Minister Subrahmanyam Jaishankar underlined his country’s intention to do what is in its interest, outraged by criticism over its imports of Russian oil.
“If India, which finances Russian oil, finances the war… tell me, then buying Russian gas does not finance the war? Let’s be a little impartial,” he said at a recent forum in Slovakia, referring to Europe’s imports of Russian gas.
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 crude oil processed at the Jamnagar refinery operated by Reliance Industries. It accounted for more than a quarter in May, according to the Center for Energy and Clean Air Research.
India’s exports of petroleum products such as diesel rose to 685,000 barrels per day from 580,000 barrels per day before the invasion of Ukraine. Most diesel is exported to Asia, but about 20 percent was sent via the Suez Canal to the Mediterranean or the Atlantic, mostly to Europe or the US, said Lauri Müllivirta, CREA’s lead analyst.
According to him, it is impossible to accurately determine the amount of Russian oil in refined products shipped from India. However, “India provides a way for Russian crude oil to enter the market,” he said.
China’s imports have also increased this year, helping Russian President Vladimir Putin’s government post a current account surplus, the widest measure of trade, of $96 billion in the four months ended April.
It is not clear whether such exports could end up subject to sanctions aimed at reducing cash flows to Russia.
Regarding sanctions: “Are these measures effective? And if not, how does the oil market work around them?” Mullivirtu said.