India, China growing markets for shunned Russian oil

NEW DELHI (AP) – India and other Asian nations are becoming an increasingly important source of oil revenue for Moscow, despite strong pressure from the US not to increase its purchases, as have the European Union and other allies Suspend energy imports from Russia in line with sanctions over its war against Ukraine.

Such sales increase Russian export earnings at a time when Washington and its allies are trying to limit financial flows in support of Moscow’s war effort.

A report released on Monday by the Helsinki, Finland-based Center for Energy and Clean Air Research, an independent think tank, said Russia spent 93 billion euros ($97.4 billion) in the first 100 days of invading the country. in revenue from fossil fuel exports Ukraine has earned, despite a drop in export volume in May.

“Revenues from fossil fuel exports are the key driver of Russia’s military buildup and aggression, accounting for 40% of federal budget revenue,” it said.

India, an oil-hungry country of 1.4 billion people, has gobbled up nearly 60 million barrels of Russian oil so far in 2022, according to commodities data firm Kpler, compared with 12 million barrels for all of 2021. Shipments to other Asian countries like China have in recent years months also increased, but to a lesser extent.

In an interview with The Associated PressSri Lanka’s prime minister said he may be forced to buy more oil from Russia as he desperately searches for fuel to keep the country afloat amid a severe economic crisis.

Prime Minister Ranil Wickremesinghe said on Saturday he would look to other sources first but was open to buying more crude from Moscow. In late May, Sri Lanka bought a shipment of 90,000 short tons (99,000 metric tons) of Russian crude oil to restart its sole refinery.

Russia is diversifying its exports. Russian Ambassador Marat Pavlov met Philippine President-elect Ferdinand Marcos Jr. on Monday and offered to help Moscow provide oil and gas. He did not name the conditions.

Marcos Jr., whose six-year term is scheduled to begin June 30, did not say if he is considering the offer.

Since the Russian invasion of Ukraine in late February, global oil prices have skyrocketed, giving refiners in India and elsewhere an added incentive to tap oil at around $120 a barrel.

Its importance to Russia increased after the 27-nation European Union, the main market for fossil fuels that provide most of Moscow’s foreign income, agreed to halt most oil purchases until the end of this year.

“It appears that a clear trend is now taking hold,” said Matt Smith, a senior analyst at Kpler who tracks Russian oil flows. As Ural oil supplies to much of Europe are curtailed, crude is heading to Asia instead, where India has become the top buyer, followed by China. Ship tracking reports show that Turkey is another important destination.

“People realize that India is such a refining hub, to take it at such a cheap price, refine it and ship it as clean products because they can make such strong margins from it,” Smith said.

In May, about 30 Russian tankers loaded with crude oil made their way to Indian shores, unloading about 430,000 barrels a day. An average of just 60,000 barrels per day arrived from January through March, according to the Center for Research on Energy and Clean Air.

Chinese state and independent refiners have also increased their purchases. In 2021, China was the largest single buyer of Russian oil, buying an average of 1.6 million barrels a day, split equally between pipeline and sea routes, according to the International Energy Agency.

While India’s imports still account for only about a quarter of that, the sharp surge since the war began 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 Antony Blinken said after a meeting of US and Indian foreign and defense ministers in April.

Meanwhile, the US and its European allies are engaged in “extremely active” discussions about coordinating action, possibly forming a cartel, to try to set a price cap on Russian oil, Treasury Secretary Janet Yellen told a Senate Finance Committee meeting on Tuesday.

The goal is to let Russian oil flow into the world market to prevent crude oil prices, which have already risen 60% this year, from rising any further, she said.

“The goal is definitely to limit revenue to Russia,” Yellen said, noting that the exact strategy has not yet been determined.

While Europe could find alternative sources of supply for about 60% of Russia’s crude oil exports, Russia also has options.

India’s Foreign Minister Subrahmanyam Jaishankar has stressed his country’s intention to do what is in its best interest and has fumed at criticism of its imports of Russian oil.

“If India finances Russian oil, it finances the war…tell me, then buying Russian gas doesn’t finance the war? Let’s be a little balanced,” he said at a recent forum in Slovakia, referring to Europe’s imports of Russian gas.

India’s crude oil imports from Russia rose to 870,000 bpd in May from 100,000 bpd in February to 370,000 bpd in April.

A growing proportion of these shipments displaced oil from Iraq and Saudi Arabia, most of it going to refineries in Sika and Jamnagar on India’s west coast. By April, Russian oil made up less than 5% of the crude processed at Reliance Industries’ Jamnagar oil refinery. In May, it accounted for more than a quarter, according to the Center for Research on Energy and Clean Air.

India’s exports of oil products such as diesel have risen to 685,000 barrels per day from 580,000 barrels per day before the invasion of Ukraine. Much of its diesel exports are sold in Asia, but about 20% were shipped via the Suez Canal bound for the Mediterranean or the Atlantic, essentially to Europe or the US, said Lauri Myllyvirta, a senior analyst at CREA.

It is impossible to quantify the exact amount of Russian crude in refined products shipped from India, he said. Still, “India offers an outlet for Russian crude to get through the market,” he said.

China’s imports have also continued to rise this yearand helped the government of Russian President Vladimir Putin run a current account surplus of $96 billion in the four months to April.

It’s unclear whether such exports could ultimately be subject to sanctions designed to limit the flow of money to Russia.

Regarding the sanctions: “Are these measures effective? And if not, how does the oil market work around them?” said Myllyvirta.

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Kurtenbach reported from Bangkok. Jim Gomez contributed from Manila, Philippines.

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