EU using loophole in sanctions to buy Russian oil, still largest importer: Think tank

The European Union (EU) is still "indirectly" the largest importer of Russian oil despite the strict sanctions that were imposed by the collective West in response to the war in Ukraine. A loophole in the G7 price cap has been enabling the bloc to purchase oil and finance Russia's President Vladimir Putin's war machine, new findings published by the Centre for Research on Energy and Clean Air (CREA), a nonprofit think tank researching energy and air pollution, suggests.

The European Union has been purchasing refined petroleum products from countries that are close allies of Russia, such as Turkey, and China, and these countries have subsequently boosted the purchase of the sanctioned Russian oil. Buying of petroleum products has ramped up "indirect" imports of Russian oil as the countries have been purchasing higher volumes of oil products. Some have turned into the biggest buyers of Russia’s crude, the Finland-based think tank said. 

EUR 42 bn worth of oil products purchased from laundromat countries

Western countries largely banned the imports of oil from Russia, but they purchased an estimated EUR 42 billion worth of oil products from countries that spiked the Russian crude oil imports in the 12 months. While the objective of the G7, Australia, and the EU has been to dismantle the revenues of Russia made from oil to cut the funding into the Ukraine conflict, the fossil fuel exports, and imports of refined oil products have stepped up these oil sales.

There has been an increased laundering of Russian oil by countries importing Russian crude and then selling oil products to price-cap coalition countries, such as the EU, the CREA noted. A major loophole has been undermining the impact of the sanctions on Russia.

Credit: CREA.

According to CREA's statistics, price cap coalition countries boosted the imports of refined oil products from other countries like China (+3.6 million tonnes or +94%), India (+0.3 million tonnes or +2%), Turkey (+1.8 million tonnes or +43%), UAE (+2.6 million tonnes or +23%) and Singapore (+1.8 million tonnes or +33%). Price cap coalition countries' rampant import of refined oil products from mostly these five countries that are also allies of Russia has spiked by an estimated +10 million tonnes (+26%) or EUR 18.7 bln (+80% in value terms) in 2023, as compared with the level that was imported the prior year. 

The think tank listed that among the price cap coalition that was involved in accelerating Russian oil sales, the largest importer of oil products from the laundromat countries was the EU. The imports by the bloc from Russian ally nations amounted to EUR 17.7 bln. Australia purchased EUR 8.0 bln worth in the 12-month period since Russia’s invasion. This was followed by the USA (EUR 6.6 bln), the UK (EUR 5.0 bln) and Japan (EUR 4.8 bln). Meanwhile, since Russia's invasion of Ukraine and the implementation of sanctions, China’s monthly exports of oil products to Europe and Australia increased far above historical levels in 2022.

China's oil product imports rise by 150%; hits 2.9 mn tonnes

China's oil product imports rose by a whopping 150% more than the quarterly average in 2022, hitting 2.9 million tonnes in the fourth quarter. Since the start of the Russian invasion of Ukraine, the seaborne imports of Russian crude oil into its Asian allies China, India, Turkey, United Arab Emirates (UAE) and Singapore increased by 140% in volume terms, CREA's findings showed. Russia is able to find more buyers as it is offering discounted oil prices due to the sanctions. According to the Center of Research on Energy and Clean Air, India's port of Sikka became the biggest oil product export port to the price cap coalition countries. It is also the largest importing port in the world of seaborne crude oil from Russia since the invasion. 

India, which has adopted a neutral foreign policy and has been a key trading partner of Russia prior to the invasion, has been staunchly vocal about its purchases of Russian crude oil even before the price cap was imposed by the G-7. “Yes, because otherwise, I’ll end up paying far more than what I can afford,” India's Finance Minister Nirmala Sitharaman had clarified in an interview in Washington. She was asked if India would continue importing Russian oil beyond the $60-a-barrel price cap implemented as a response to the invasion of Ukraine. “We have a large population and we also, therefore, have to look at prices which are going to be affordable for us," India's Finance Minister, had said.