War in Ukraine: Who Buys Russian Oil and Gas?
- Author, Shruti Menon
- role, BBC journalist
photo credit, Getty Images
India’s imports of Russian oil increased at the beginning of the year, peaking in June and July.
India and China have become the largest buyers of Russian oil in a situation where Western countries are boycotting the supply of hydrocarbons to Russia due to sanctions against Putin’s country.
The strategy, established by the G7 countries, supported by the European Union and Australia, and aimed at limiting the price of Russian oil, has created disruptions in the sector. Uncertainty reigns in global markets today.
Russia sells its oil to Asian buyers at cheaper prices as major oil-producing countries try to maintain world prices while controlling output.
How much Russian oil is exported to Asia?
India’s imports of Russian oil increased at the beginning of the year, peaking in June and July. They remained stable in November.
Russia sells oil at a discount from March 2022.
China’s purchase of Russian oil increased this year and decreased in February; The period that coincided with the beginning of the war between Ukraine and Russia. Then there is an increase in the following months.
After the invasion of Ukraine, Russia has been selling oil at a low price since March 2022.
In March, the total oil import of China and India from Russia exceeded that of the 27 member countries of the EU. A further increase in India’s oil purchases has been observed since the end of November.
“This is probably a sign that shipments have stopped going to EU countries and are going to India,” says Matt Smith, an oil expert at Kpler.
Experts believe that if oil supply continues at the same level in December, Russia may become India’s largest supplier.
Other countries have also benefited from discounted Russian crude – for example, Sri Lanka, which is experiencing a severe economic crisis.
Falling oil prices increase flows to Asia
Pakistan has also held talks with Russia to buy oil at a discount, although no deal has yet been reached.
After its attack on Ukraine, Russia lost many buyers for its oil. Some countries and companies based abroad have decided to stop sourcing from Russia. Results: Russian prices began to fall.
At the beginning of the year, Urals, the benchmark for crude oil, was more than $30 cheaper than the European benchmark Brent.
Then in September, the price of a barrel fell to 20 dollars. In November, the price of crude oil rose again and reached $33 per barrel compared to Brent.
Aiming to protect its interests, the Indian government buys crude oil from Russia. He says that he should take the oil from the cheapest place.
photo credit, Getty Images
The increase in global oil prices worries the Indian authorities
The US government expressed its displeasure. But today everything is clear. Uncle Sam’s country accepts that India can continue to buy Russian oil at cheaper prices.
On the other hand, the EU has completely stopped importing Russian oil by sea. A way for him to impose sanctions on Russia.
A strategy aimed at capping G7 prices to keep Russian exports below $60, or 57 euros and 48 pounds a barrel, is already in place. Kpler analyst Matt Smith says a lax price cap could make the strategy ineffective.
But experts also emphasize that a complete boycott of Russian oil would cause greater market instability, including a possible increase in oil prices. This scenario would be profitable for Moscow.
It is not yet clear how the price cap might affect countries like India and China, which already buy Russian oil at a discount.
Moscow said it will stop selling crude oil to countries that follow the G7 decision.
But Maria Shagina, a researcher at the International Institute for Strategic Studies, says that redirecting the EU’s oil route to Asia will be “more expensive, longer and more tedious” for Russia.
What is the effect of sanctions against Russia?
While the price of Russian crude is attractive, Indian refineries have struggled to finance their supplies as sanctions against Russian banks have affected payment transactions.
One option India considered was a system based on local currencies, where Indian exporters to Russia are paid in rubles instead of US dollars or euros, and imports are paid in rupees. This strategy did not work.
However, China’s state-owned oil companies use Chinese yuan rather than dollars to buy oil.
How much Russian gas goes to Asia?
About 50% of India’s total gas needs come from abroad – but mostly from the Gulf countries and very little from Russia.
“LNG supply [gaz naturel liquéfié] “Shipments to India are rare,” says Antonio Peciccia, a commodity industry expert at Argus Media. We estimate five shipments this year compared to seven shipments last year.”
China imports most of its gas through pipelines from Central Asia. Currently, Turkmenistan is the largest supplier.
China imports gas through pipelines from Central Asia.
However, a new pipeline called “Power of Siberia” will be launched. Normally, this would happen in 10 years, when Russia may well take over as China’s largest gas supplier.
This year we are witnessing strong imports of liquefied natural gas from Russia, although the bulk of Chinese LNG still comes from other countries.
China has also signed new agreements to transport Russian LNG by sea through the Arctic.
