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Ukraine crisis: Russian oil turns to Asia Ukraine crisis: Russian oil and gas turn to Asia
(14 days later)
Countries in Asia are turning to Russia for discounted oil as global energy prices remain high, and Western nations seek to scale down their reliance on Russian energy. India and China have been increasingly buying discounted Russian oil as global energy prices remain high and Western nations seek to scale down their reliance on Russian energy.
India and China have been buying bulk of the oil, according to shipping data. Facing criticism from Western nations for its Russian oil purchases, India's Foreign Minister S Jaishankar said his country had little choice "when the price of oil is breaking our back".
At the Shanghai Cooperation Organisation summit in Uzbekistan, Russian President Vladimir Putin met Indian Prime Minister Narendra Modi and said the trade between the two countries was growing.
Where's Russian oil going?Where's Russian oil going?
Although exports to the European Union (EU) have fallen since Russia's invasion of Ukraine, the bloc is still buying a significant amount - over one million barrels of oil per day. India and China now account for over half of all Russia's seaborne oil exports.
However, EU members states have said they'll ban all seaborne imports from December (most Russian oil comes by sea rather than by pipeline). Russia is now China's biggest supplier of oil, taking over from Saudi Arabia in 2022.
India and China have recently become big buyers and now account for over half of all Russia's seaborne oil exports. In March this year, combined oil imports by China and India from Russia overtook those from the 27 EU member states.
"India accounts for the bulk of Russian crude flows redirected to Asia," says Sean Cronin, head of oil analysis at Argus Media. India's purchases of Russian oil have fluctuated this year, falling in February at the start of Russia's invasion of Ukraine, but then rising significantly in the following months.
In March this year, combined oil imports by China and India from Russia overtook those from the 27 EU member states by volume. China's imports of Russian oil have rocketed from a very low base at the start of this year reaching a peak in June and July and largely maintaining these levels through to September.
India's purchases of Russian oil known as Urals (a crude blend typically exported to Europe) increased sharply earlier this year.
India's imports of another Russian crude blend called East Siberia Pacific Ocean (ESPO) have also seen a rise, shipping information shows.
China has been buying larger quantities of both Urals and ESPO since March. In early July, it was reported to have bought record amounts for the second month in a row.
The Zhoushan crude oil terminal in China prepares to receive a tanker
In contrast, Japan has made clear it will phase out Russian oil imports, and South Korean imports of Russian crude have fallen.
Myanmar's military regime recently said it would also start importing from Russia.Myanmar's military regime recently said it would also start importing from Russia.
Sri Lanka, grappling with a severe economic crisis, is taking advantage of discounted Russian oil with three shipments.Sri Lanka, grappling with a severe economic crisis, is taking advantage of discounted Russian oil with three shipments.
Cheaper oil driving the flow to Asia In contrast, Japan has made clear it will phase out Russian oil imports, and South Korean imports of Russian crude have fallen.
Following its invasion of Ukraine in February, Russia had fewer buyers for its Ural crude oil, with some foreign governments and companies deciding to shun its energy exports, and its price started to fall. Cheaper oil is driving the flow to Asia
At one point earlier in the year, Russian crude was more than $30 a barrel cheaper than Brent crude [the global benchmark]. It is now around $20 a barrel cheaper. Following its invasion of Ukraine, Russia had fewer buyers for its Ural crude oil, with some foreign governments and companies deciding to shun its energy exports, and its price started to fall.
At one point Russian Urals crude was more than $30 a barrel cheaper than Brent crude (the global benchmark). By the end of September it was around $20 a barrel cheaper.
Can the world manage without Russian oil and gas?Can the world manage without Russian oil and gas?
India imports more than 80% of its oilIndia imports more than 80% of its oil
In July, India's imports of Russian oil fell slightly as the price was less attractive compared with crude from Saudi Arabia. The Indian government has defended its purchases from Russia, saying it has to source oil from where it is cheapest.
The Indian government has defended its purchases from Russia, saying it has to source oil from where it is cheapest. We don't know the exact price India is paying for Russian oil. The US government has been critical of these purchases, but has little influence over decisions by Asian government as to where they buy their oil.
The US government has acknowledged that it can't stop these purchases because there are no secondary sanctions on countries doing business with Russia. A plan proposed by the G7 group of nations (UK, US, Canada, France, Germany, Italy and Japan) to cap the price of oil purchased from Russia as a means of limiting Russia's revenue appears largely symbolic.
It's also not clear if India or China will follow a plan by the G7 countries (UK, US, Canada, France, Germany, Italy and Japan) to cap the price of Russian oil in a bid to limit Moscow's earnings from energy exports. Russian oil is already significantly cheaper than oil from other sources, and Moscow has said will stop selling to countries that attempt to impose price caps.
Recently, Ukrainian Foreign Minister Dmytro Kuleba said "every barrel of Russian crude oil delivered to India has a good portion of Ukrainian blood in it". What's the impact of sanctions on the oil trade?
The impact of sanctions Although the price of Russian crude oil is attractive, India's refineries are facing a challenge trying to finance these purchases, because sanctions on Russian banks are affecting payment transactions.
Although the price is attractive, India's big refining companies are facing a challenge trying to finance these purchases, because of sanctions on Russian banks. One of the options India is looking at is a system based on local currencies, where Indian exporters to Russia get paid in roubles instead of dollars or euros and imports are paid for in rupees.
It's a problem facing trade in both directions. China's state-owned oil enterprises are increasingly using the Chinese renminbi rather than the US dollar to finance oil purchases from abroad.
One of the options India is looking at is a transaction system based on local currencies, where Indian exporters to Russia get paid in roubles instead of dollars or euros and imports are paid for in rupees. What's happening to gas exports from Russia?
The US has made clear its reservations with this, saying it could "prop up the rouble or undermine the dollar-based financial system". Nearly 50% of India's total gas requirements come from abroad - mostly from the Gulf States, with very little from Russia.
Russia was also reported to be asking for payments from India in the currency of the UAE, although the trading firms involved did not confirm the report. "Deliveries of Russian LNG (liquefied natural gas) to India are rare" says Antonio Peciccia, a commodity industry expert with Argus media. "We believe five cargoes so far this year, down from seven a year earlier".
And China's state-owned oil enterprises are increasingly using the Chinese renminbi rather than the US dollar to finance oil purchases from abroad. China imports most of its gas via pipeline from central Asia. Currently, Turkmenistan is the largest supplier.
Where else are Indian and China getting oil? Once a new pipeline, known as Power of Siberia, is completed later this decade, Russia may well take over as China's biggest supplier of gas.
India's imports of crude oil from the US went up sharply at the end of 2021 and earlier this year year, but then fell before picking up slightly. China is also increasing its LNG importing capacity from Russia and has signed new deals with Russian companies to transport LNG via the Arctic.
Although India's imports from Russia have grown, it also buys a large amount of oil from Middle Eastern countries, noticeably Iraq and Saudi Arabia. "Looking at customs data for August, Russian LNG was actually the most expensive one China took last month," says Mr Peciccia.
China also continues to buy oil from the Middle East as well Angola and Brazil, although in July, Russia remained its top supplier for the third month in a row. This is likely, he says, because China bought LNG from the short-term market which is currently more expensive than long-term contracts.
In September, Russia's Gazprom and the China National Petroleum Corporation agreed to use Russian roubles and yuan instead of dollars to make payments for Russian gas.
With additional reporting from Wanyuan Song
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