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India’s imports of Russian oil jump fivefold, helping war efforts
Russian fossil fuel exports to China and India have risen significantly since Moscow invaded Ukraine early this year, helping to replenish the Kremlin’s war chest even as shipments to the U.S., Europe and Japan fall sharply.
The value of Russia’s energy exports to China increased 17%, or 30 million euros ($29 million), in the July-August period compared with February and March, according to an analysis of data from the Center for Research on Energy and Clean Air, a Finnish think tank. Coal exports jumped 53%, while oil shipments rose 16%.
Exports to India increased by a factor of 5.7, or 40 million euros, during the same period, marking the largest increase in the world. Russia was the second-largest supplier of crude for India in June, jumping from 10th place in 2021, according to Indian trade statistics.
Russia’s overall daily exports of oil, coal, and natural gas in July and August were down 18% from February and March. Natural gas sent via pipeline sustained the largest decline of 56%, followed by a 34% drop in petroleum products and a 29% fall in coal. Crude oil, on the other hand, increased 19%.
Energy is a key industry for Russia, with oil and gas accounting for about 40% of government revenue. To starve Moscow of funds to finance its war in Ukraine, the U.S., Japan and the European Union have imposed a series of sanctions on Russian oil and coal.
As a result, Russia’s fossil fuel exports to the EU fell 35%. The U.S. and the U.K. saw plunges of roughly 90%, and Japan a drop of around 70%. The decrease in exports to these countries totals about 250 million euros per day.
But the overall decrease in Russia’s energy exports is much smaller, at about 170 million euros because of Moscow’s successful efforts to sell to countries not participating in the sanctions, such as China and India, at a discount.
Exports to the Middle East also expanded, with shipments to the United Arab Emirates and Egypt increasing by factors of about nine and three. They are reportedly processing Russian crude oil into petrochemical products for export to the rest of the world.
For example, the Port of Fujairah in the UAE is considered a “major hub” for the export of petroleum products mixed with Russian products. As the sanctions on Russian gas and oil take root in Europe and the U.S., Russia’s oil is reaching global customers through third-party processors.
The value of exports to Turkey increased about 20%. The country is a NATO member and has criticized the Russian invasion of Ukraine, but it is also cautious about economic sanctions.
U.S. Treasury Secretary Janet Yellen revealed in September that Russia is heavily discounting oil for emerging economies, adding that she has confirmed a 30% price reduction to several countries. Indonesian President Joko Widodo did not rule out the possibility of importing Russian oil, telling the Financial Times that “we always monitor all of the options.”
Soaring energy prices are also blunting the impact of economic sanctions. According to CREA, Russia earned a total of 158 billion euros from fossil fuel exports in the six months following the invasion of Ukraine. It estimates Russia’s war costs for the same period to be around 100 billion euros.
To exact a bigger toll on Russia’s finances, finance ministers from the Group of Seven major economies agreed in September to introduce a price cap on Russian oil imports, starting in December. The arrangement bars insurance companies from insuring marine transportation of oil above the cap. EU member states agreed to the cap on Wednesday.
According to the Russian Ministry of Finance, the country had a fiscal surplus of 1.37 trillion rubles ($21.9 billion) in the first half of 2022, but the figure narrowed to 137 billion rubles for the year to August.
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