Russian oil continues to flow to India and China

It has been exactly six weeks since Russia invaded Ukraine, and there is no end to the greatest existential crisis of humanity in modern times. In response to Russia’s unprovoked and unjust war, the United States and the West have attacked the rogue nation with numerous sanctions. Announced a few days ago Mostly targeting Russia’s financial sector.

But so far, Russia’s major energy sector has largely been saved. No country has declared a ban on Russia’s energy products, except for self-approval by Lithuania and Poland and by refiners and bankers.

So far, Russian oil and gas exports to the EU have remained largely unchanged Baltic countries Russia has imposed a 100% ban on energy imports. Poland, the main route for Russian energy supplies, has been more efficient than most since the move. Prevent Russian coal imports And Announced measures to stop Russia’s oil imports By the end of the year. Poland – home to the ~ 1.3mb / d Druzhba Pipeline, which carries Russian crude to multiple points in Poland, Germany and the Czech Republic – directly uses ~ 330kb / d of Russian crude and imports ~ 9.4mt of Russian thermal coal. 2020, 5% of Russian exports. The EU currently receives 40% of its natural gas from Russia, which powers everything from home heating to industrial production, and accounts for 25% of the meeting’s total energy consumption.

But that may soon change.

Flow of The mayor of Kiev has called for an end to “bloody money” for Russia Western nations are preparing new sanctions on Moscow following the discovery of dead civilians on the streets of a captured Ukrainian city from Russian invaders. As Russian forces withdrew from northern Ukraine, they retreated to the south and east. Horrible pictures from the city of Pucha Near Kiev, a mass grave and the bodies of people shot at close range provoked international outrage.

Experts now say that the atrocities against Ukrainian citizens, the atrocities revealed by the withdrawal of Russian troops from the northern and eastern parts of Kiev, have created an opportunity for EU countries to impose sanctions on Russian oil in the coming months. In the United States, Treasury Secretary Janet Yellen has warned. “The biggest economic impacts “from the Ukraine War.

The million-dollar question now is how much the total embargo on Russian energy products will destabilize Russia’s economy.

Unfortunately, the Russian oil and gas embargo by the United States and the European Union will not affect Russia as much as the West hopes, and the presence of highly discounted Urals has proven to be quite inevitable for some.

India’s imports from Russia are on the rise

Although India has to import 80% of its needs, India has never been a major buyer of Russian crude oil. In a typical year, India imports only 2-5% of its crude oil from Russia, at the same rate as the US did before announcing a 100% embargo on Russia’s energy products. In fact, India imported only 12 million barrels of Russian crude oil by 2021, with the bulk of its oil coming from Iraq, Saudi Arabia, the United Arab Emirates and Nigeria.

But there are now reports of a “significant improvement” in Russian oil supplies to India.

Matt Smith, Leading Oil Analyst at Kpler, Told CNBC Since the beginning of March, five Russian cargoes, or about 6 million barrels, have been loaded and shipped to India. In other words, India has been importing crude oil from Russia for a whole year in a month.

Also, it may be about money.

According to the International Energy Agency (IEA), Urals crude oil from Russia is being offered at a record discount. Ellen Walt, head of Transversal Consulting, told CNBC two weeks ago that two commodity trading companies, Glencore and Vittol, were offering discounts of $ 30 and $ 25, respectively, on the Ural mix. The main compound exported by Russia is Ural.

Experts say the simple economy is to blame for the White House’s pressure on Delhi to stop buying crude oil from Russia.

“Today, the motives of the Indian government are economic and not political. India will always look for a deal in their oil import strategy.Samir N, Business Chairman, Vocal Group, a government relations consultancy. Kapadia told CNBC via email.

However, India has maintained a cordial relationship with Russia for many years, and the fact that Russia supplies 60% of its military and defense equipment to the Asian nation is not lost on many readers. Russia has also been a key ally in key issues such as China and India’s dispute with Pakistan over Kashmir.

China for redemption?

But India will not be the only country to finance Putin’s illegal war.

Given China’s experience in avoiding sanctions, you can expect it to be one of the first countries to line up to fold the cheap barrels of the Urals. After all, it has been kept very secret that Beijing uses all sorts of covert methods to import Iranian oil, which was allowed in 2011, at a cheaper price. China is already Russia’s largest oil consumer, importing an average of 1.72 MB / s. D. in 2021.

Related: The world’s richest man has cut $ 400 billion in wealth amid the Ukraine crisis

However, Reuters reports that China’s crude oil imports from Russia in the first two months of the year. Actually reduced by 9.1% 1.57 MB / d.

But this has little to do with China suddenly acting with sacred or moral consensus. In contrast, Beijing’s repression of tea tanks, small independent refineries, has caused a significant decline.

In June, Beijing announced a dramatic change in fortunes Huge cuts in import quota To the country’s private oil refineries. According to Reuters, China’s independent purifiers Given The second batch allocation for this year was 35.24 million tonnes of crude oil import quota, a 35% reduction from 53.88 million tonnes in the same installment a year ago.

The big cut came in part Government repression Over the past five years, they have been increasingly dominating private Chinese refineries known as teapots. The move is aimed at allowing Beijing to more precisely control foreign oil flows as it doubles scams such as tax evasion, fuel smuggling and violations of environmental and emissions regulations by independent refineries. China’s depots are steadily capturing market share from such entrenched state players China Petroleum and Chemical Corporation (NYSE: SNP), also known as Synobec, And Petrosina Co. (NYSE: PTR) In 2015, Beijing liberalized its oil business somewhat. Depots now control almost 30% of China’s crude refining levels, up from ~ 10% in 2013.

But make no mistake about it: China does not allow itself to waste a good crisis and is widely expected to take advantage of the ongoing snuff.

China still imports Russian oil, but its purchases will increase if it can pay in yuan and discounts. Basically, Russia is under pressure because of the difficulty in selling its oil. China really wants the cheapest oil … even in the $ 90 range it is too expensive for China, “he added. I do not know what is preventing China from buying. Walt told CNBC in an email.

Another big reason: Chinese refiners prefer ESPO crude.

The ESPO (Eastern Siberia Pacific Ocean) oil pipeline It is one of the many outlets for Russian crude oil. With a capacity of 58 million tons per year, the 4,188 km long pipeline is longer than the Yamal-Europe pipeline and exports crude oil from Russia to the Asia-Pacific markets of Japan, China and Korea.

If the Yamal and Trushpa pipelines are shut down, ESPO could provide a lifeline to Russia. The Russian natural gas fields in the Yamal Peninsula and western Siberia are connected to Poland and Germany via Belarus, while the Trushpa pipeline supplies crude oil from Russia to Poland and Germany via Belarus, Hungary, Slovakia and the Czech Republic to Ukraine.

Fortunately for the West, the IEA says, the availability of highly discounted Russian crude oil is still low, with Asian oil importers largely sticking with traditional suppliers in the Middle East, Latin America and Africa. Moreover, Russia is likely to fight to fill the gap left by the embargo on Western imports, with the IEA estimating that Russia’s oil supply of 3 million barrels a day will be shut down starting in April, while commodity analysts Standard Chartered said it could take years for Russia’s vast energy empire to fully recover.

Alex Kimani for Oilprice.com

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