What we initially only suspected in our recent article “How effective is an oil embargo?” has now demonstrably come true based on new figures. In the second month of the war against Ukraine, Russia exported more oil than a year before, despite the oil embargo. And this despite the fact that several countries are already no longer buying oil from Russia. According to the report, the Russian oil is going to Asia in tankers. Although Russia gives a hefty discount, in view of the drastic increase in prices, revenues have hardly fallen compared to the previous year.
India buys large quantities of Russian oil
India in particular has stepped in as a major buyer. India is the third largest oil importer in the world. India maintains close trade relations with Russia, but has mainly bought weapons there. Now India is buying large quantities of oil. On the one hand, India needs more and more oil, and on the other hand, India can now get the oil cheaper.
Russia gives high discount – state financing nevertheless secured
India became “the biggest buyer of Russian Urals crude oil” in April, “lured by deep discounts as several regular European customers boycotted it after Russia’s invasion of Ukraine”, according to a report by Standard & Poor’s rating agency. In the process, India took a quarter of Russia’s total export volume in April. In the process, Russia gives the Indians a price discount of up to 40 dollars per barrel. At the world market price, a barrel currently costs more than 100 dollars. However, this is not a problem for Russia, because a price of 45 dollars is sufficient to finance the national budget.
Despite oil embargo – Russia sells more oil than before the war
The Indian energy ministry is reacting to the global criticism, citing the country’s enormous energy needs. That is why India buys the oil it needs from all suppliers in the world. Despite sanctions by the West, Russia sells even more oil than before the war.
However, oil expert Adi Imsirovic of the Oxford Institute for Energy Studies points out that not all oil transported on tankers was actually sold. For example, some of the tankers would be docked in the Caribbean and could not call at western ports because of the sanctions. However, it should only be a matter of time before these tankers are assigned new ports of destination.
In 2021, Russia produced about 10.5 million barrels of crude oil and oil products per day. Of this, 7 million barrels a day went into export. This is roughly equivalent to 13 per cent of the world’s oil trade. Of this, 2.7 million barrels of oil and 1.5 million barrels of oil products went to Europe before the war. This corresponds to more than half of Russia’s exports. A large part of this was transported via pipelines and rail.
Enough tankers on the world market to ship oil
According to Standard & Poor’s, however, there are enough tankers on the world market to ship these quantities to Asia. Another potential buyer would be China. However, it is currently unclear how much Russian oil China is currently buying. The Chinese state-owned companies are obviously holding back on their business in Russia. China does not want to mess with the US and run the risk of being hit with secondary sanctions. However, private Chinese oil companies are already buying large quantities of Russian oil at deep discounts, according to a report in the Financial Times. It is an open secret in the industry, however, that there are an unusually large number of oil deliveries from Russia to the People’s Republic. Tankers are already piling up in front of Chinese ports.
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