In spite of Western efforts to punish Moscow for its invasion of Ukraine and to keep revenue flowing to the Kremlin, a surge in demand for discounted Russian oil from Asia is making up for the sharply lower number of barrels being sold to Europe. This is dulling the effects of Western efforts to punish Moscow and keeping revenue flowing to the Kremlin.
China and India have taken up the majority of the extra oil that has been made available. In May, compared to the previous month, China’s imports of oil from Russia increased by 28 percent, reaching a new high. This increase helped Russia surpass Saudi Arabia as China’s top supplier. According to research conducted by Kpler, a company that specialises in market research, the majority of this growth was driven by India. Prior to this year, India imported practically little oil from Russia. Now, it imports more than 760,000 barrels per day from Russia.
Even while South Korea and Japan have decreased their purchases of Russian oil, the amounts they have reduced are a fraction of what China and India are purchasing.
Because of the potential consequences that come with the sanctions that were put on Russia as a punishment for its invasion of Ukraine, Russian oil is now being sold at a substantial discount. According to the International Energy Agency, surging energy prices have resulted in an increase in oil income for Russia, which took in $1.7 billion more last month than it did in April. This is despite the fact that energy costs have been on the rise.
Despite the fact that it is unknown to what extent Asia would continue to purchase the oil as Europe weans itself off of Russian energy, the change has enabled Moscow to maintain current production levels, contrary to the projections of experts who believed that Moscow’s output would drop. In addition, the top leader of China, Xi Jinping, has given indications that he intends to maintain his commitment to maintaining tight relations with Russia.
According to Kpler’s calculations, the amount of crude oil that Russia ships to Asia through sea has almost doubled, going from around one million barrels per day before Russia’s invasion of Ukraine to approximately two million barrels per day after the attack.
According to economists, the combination of lower pricing for Russian crude and higher prices at the pump means that Indian refiners are gaining twice as much as they would have been otherwise. According to the Center for Research on Energy and Clean Air, which is located in Finland, some of the oil products that India re-exported travelled in ships headed for the United States of America, Britain, France, and Italy.
The growing risk of inflation has increased other nations’ interest in purchasing oil from Russia as a potential source of revenue. According to Bloomberg, the energy minister of South Africa said that his nation was contemplating purchasing oil from Russia in order to combat the high cost of gasoline. The Prime Minister of Sri Lanka said to the Associated Press that his nation may not have any other option than to seek assistance from Russia. In addition, the Russian ambassador to the Philippines said at a press conference that he had mentioned to the president-elect Ferdinand Marcos Jr. that Russia was able to assist the Philippines with oil, gas, and other forms of energy.
However, despite the fact that Europe’s complete oil embargo on Russia will not go into force until the end of 2022, the continent is still looking at other methods to punish Moscow for the war.