New data shows that the EU is still among the largest importers of oil products from Russia despite strict sanctions on Moscow since the invasion of Ukraine, the Centre for Research on Energy and Clean Air (CREA) reports.
“Western countries that have largely banned the imports of oil from Russia imported €42bn worth of oil products from countries that have increased imports of Russian crude oil in the 12-month period since Russia’s invasion,” CREA said. (chart)
While the EU has banned direct imports of oil and its products, it indirectly imports oil from third countries that have become the main buyers of energy from Moscow, undermining the Western sanctions. Many EU countries are happy to turn a blind eye to the rerouting of oil flows simply because they are struggling to meet their energy needs, and the new routes fulfil the letter, if not the spirit, of the sanctions.
CREA identified five laundromat countries that export Russian crude to the EU in its new report. These countries have ramped up their imports of Russian crude and sell the refined products to Western counterparts that have imposed sanctions in an attempt to cut the Kremlin off from its main source of revenues that fund the Ukraine invasion.
The five countries are China, India, Turkey, the United Arab Emirates (UAE) and Singapore. One year on from Russia’s invasion of Ukraine, the price cap coalition countries have increased the imports of refined oil products from:
China (+3.6mn tonnes or +94%),
India (+0.3mn tonnes or +2%),
Turkey (+1.8mn tonnes or +43%),
UAE (+2.6mn tonnes or +23%) and
Singapore (+1.8mn tonnes or +33%).
Overall, the PetroChina Dalian refinery in China is the largest recipient of Russian crude oil in the world, due to its pipeline connection to Russia. The main export destination for oil products from Dalian is Australia.
Price cap coalition countries’ imports of refined oil products from these five countries rose by 10mn tonnes (up 26%) or €18.7bn (up 80% in value terms) in the year since Russia’s invasion compared to the prior year, with the vast majority going to the EU.
Just over half (56%) of Russian crude oil shipped to laundromat countries has been transported by vessels owned and/or insured by the price cap coalition countries – especially Greek ships – since December 2022 up until the anniversary of Russia’s invasion of Ukraine. This share is 74% for oil products exported from laundromat countries from December 2022 until the anniversary, says CREA.
According to the report, even though the EU currently uses legal means to import Russian oil by changing import origin, it continues to fund the war chest. The EU, Group of Seven (G7) countries and Australia have joined the US in imposing some of the strictest sanctions to crack down on Russian crude oil and oil products, but large loopholes in the sanctions regime remain.
Imports of “non-Russian” oil products produced from Russian crude have increased “by leaps and bounds” from the laundromat countries, CREA says, all of which have become the largest importers of Russian crude since the invasion.
The report said that the EU, G7 countries and Australia have imported a total €42bn worth of oil products from the laundromat countries for the entire year since the invasion, with the EU being the largest importer, amounting to €17.7bn in the year since the invasion.
The co-author of the report and co-founder and lead analyst at CREA, Lauri Myllyvirta, said that the imports blunt the effect of the sanctions on Russia. The imports of Russian crude oil by the five Asian and Middle East countries rose to more than 140% in volume compared to the year before the war, and have completely replaced the oil that used to be exported to Europe, with the total value of imports rising to €74.8bn.
The exports of these middlemen countries to the West have increased by 80% in value and 26% in volume in the period.
The price-cap coalition countries have boosted imports of refined oil from China by 93%, from India by 2%, Turkey by 43%, UAE by 23% and Singapore by 33%.
India, however, became the largest exporter of oil to price-cap coalition countries since December 2022 after the G7 cap kicked in. Its exports rose to 3.8mn tonnes, while China exported 3mn tonnes.