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India and China are developing markets for shunned Russian oil

NEW DELHI — India and other Asian countries are becoming an increasingly vital source of oil revenue for Moscow despite heavy pressure from the United States not to increase purchases, while the European Union and other other allies have halted energy imports from Russia under sanctions imposed by its war on Ukraine. .

These sales increase Russian export revenues at a time when Washington and its allies are trying to limit financial flows supporting Moscow’s war effort.

A report by the Helsinki, Finland-based Center for Energy and Clean Air Research, an independent think tank released on Monday, said Russia gained 93 billion euros ($97.4 billion) of income from fossil fuel exports in the first 100 days of the country’s invasion. Ukraine, despite a decline in export volumes in May.

“Fossil fuel export revenues are the primary catalyst for Russia’s military buildup and aggression, providing 40% of federal budget revenue,” he said.

India, an oil-hungry country of 1.4 billion people, has so far gobbled up nearly 60 million barrels of Russian oil in 2022, up from 12 million barrels in 2021, according to the oil data firm. Kpler raw materials. Shipments to other Asian countries, such as China, have also increased in recent months, but to a lesser extent.

In an interview with The Associated Press, Sri 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 going amid a serious economic crisis.

Prime Minister Ranil Wickremesinghe said on Saturday he would look to other sources first, but would be prepared to buy more crude from Moscow. At the end of May, Sri Lanka bought a shipment of 90,000 metric tons (99,000 tonnes) of Russian crude to restart its sole refinery.

Russia seeks to diversify its exports. Russian Ambassador Marat Pavlov met with Philippine President-elect Ferdinand Marcos Jr. on Monday and offered Moscow’s help in providing oil and gas. He did not specify the terms.

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

Since Russia’s invasion of Ukraine in late February, global oil prices have soared, prompting refiners in India and other countries to exploit the oil. around $120 a barrel.

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

“It looks like a distinct trend is taking hold now,” said Matt Smith, a senior analyst at Kpler who tracks Russian oil flows. While oil shipments from the Urals to much of Europe are down, crude is instead flowing to Asia, where India has become the top buyer, followed by China. Vessel tracking reports show Turkey as another key destination.

“People are realizing that India is such a refining hub, taking it at such a cheap price, refining it and sending it out as clean produce because they can make such high margins on it. “Smith said.

In May, around 30 Russian tankers loaded with crude made their way to the Indian coast, unloading around 430,000 barrels a day. An average of just 60,000 barrels a day arrived in January-March, according to the Center for Energy and Clean Air Research.

Chinese state-owned and independent refiners have also stepped up their purchases. In 2021, China was the biggest buyer of Russian oil, taking 1.6 million barrels a day on average, split evenly between pipelines and shipping routes, according to the International Energy Agency.

While India’s imports are still only about a quarter of that, the sharp increase since the start of the war is a potential source of friction between Washington and New Delhi.

The United States 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 briefing. meeting of US and Indian foreign and defense ministers in April.

Meanwhile, the United States and its European allies are engaged in “extremely active” talks over coordination measures, possibly forming a cartel, to try to set a price cap for Russian oil, it said on Tuesday. Treasury Secretary Janet Yellen at a meeting of the Senate Finance Committee.

The aim would be to keep Russian oil flowing to the world market to prevent crude oil prices, already up 60% this year, from rising even higher, she said.

“Absolutely, the goal is to limit the revenue going to Russia,” Yellen said, indicating that the exact strategy had yet to be decided.

While Europe could find alternative sources for its purchases of around 60% of Russian crude exports, Russia also has options.

Indian Foreign Minister Subrahmanyam Jaishankar has underlined his country’s intention to do what is in its best interest, bristling at criticism over its imports of Russian oil.

“If India funding Russian oil is funding the war… tell me, then buying Russian gas is not funding the war? Let’s be a bit impartial,” he said at a recent forum in Slovakia, referring to European imports of Russian gas.

Indian imports of crude from Russia rose from 100,000 barrels per day in February to 370,000 per day in April and 870,000 per day in May.

A growing share of these shipments moved oil from Iraq and Saudi Arabia, with most going to refineries in Sika and Jamnagar on India’s west coast. Until April, Russian oil accounted for less than 5% of crude processed at the Jamnagar Oil Refinery run by Reliance Industries. In May, it was more than a quarter, according to the Center for Energy and Clean Air Research.

Indian exports of petroleum products like diesel increased 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 around 20% were shipped through the Suez Canal, heading for the Mediterranean or the Atlantic, mostly Europe or the United States, Lauri said. Myllyvirta, principal analyst at CREA.

It is impossible to quantify the exact amount of Russian crude in refined products shipped out of India, he said. Still, “India provides an outlet for Russian crude oil to come to market,” he said.

Chinese imports have also increased this year, helping Russian President Vladimir Putin’s government run a current account surplus, the broadest measure of trade, of $96 billion for the four months ending April.

It is not clear whether these exports could possibly be subject to sanctions intended to reduce cash flow to Russia.

Regarding 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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