Russia has successfully circumvented sanctions on its oil and diverted flows from Europe to Asia, mainly China and India, which together accounted for around 90% of its crude exports this year, according to Deputy Prime Minister Alexander Novak.
Russia’s Oil Strategy Amid Western Pressure
Russia, the world’s second-largest oil producer, has been facing increasing pressure from the West since it invaded Ukraine in February 2022. The US banned Russian energy imports in March, and the European Union agreed to slash 90% of its Russian oil imports by the end of this year. The G7 also imposed price caps, above which Western insurers and financiers are prohibited from offering services for the shipment of Russian oil.
In response, Russia has shifted its oil strategy and focused on expanding its market share in Asia, especially in China and India, the world’s largest and third-largest oil consumers, respectively. Russia has also explored new markets in Africa and Southeast Asia, such as Egypt, Morocco, Myanmar, and Pakistan.
Russia has been using various means to bypass the sanctions and deliver its oil to its Asian customers, such as swapping barrels with other producers, using intermediaries, and changing the names and grades of its crude. Russia has also leveraged its pipeline network, such as the Eastern Siberia-Pacific Ocean (ESPO) pipeline and the Power of Siberia gas pipeline, to increase its supplies to China.
Russia’s Oil Exports to China and India Surge
According to the International Energy Agency (IEA), Russia-origin seaborne crude exports averaged 3.87 million barrels per day in May, the highest since Russia invaded Ukraine. “In May 2023, India and China accounted for almost 80% of Russian crude oil exports,” IEA said. “In turn, Russia made up 45% and 20% of crude imports in India and China, respectively.”
China’s imports from Russia have remained constant, as Beijing has been diversifying its oil sources and reducing its dependence on the Middle East amid geopolitical tensions. China imported an average of 1.67 million barrels per day of Russian oil in the first five months of 2023, slightly lower than the 1.69 million barrels per day in the same period last year.
India’s purchases of Russian oil, however, have ramped up significantly, as New Delhi has been looking for cheaper and alternative supplies to cope with the rising oil prices and the impact of the COVID-19 pandemic on its economy. India imported a record amount of 819,000 barrels per day of Russian oil in May, about three times more than the 227,000 barrels per day in April. In May, Russia became India’s second-largest oil supplier behind Iraq, overtaking Saudi Arabia.
Russia’s Oil Revenues Rise Despite Sanctions
Despite the sanctions and boycotts from the West, Russia’s oil revenues have risen this year, thanks to the surge in energy prices and the strong demand from Asia. Sales of Russian oil and gas are expected to rise to $285 billion in 2022, 20% higher than the country’s $235.6 billion in oil and gas in 2021, according to a Bloomberg Economics report earlier this month.
Russia’s oil strategy has also drawn international scrutiny and criticism, especially from the US, which has urged India to refrain from buying too much Russian oil. Amos Hochstein, the US special envoy for energy affairs, told senators on Thursday that he had raised the issue with his Indian counterparts and warned them of the potential consequences of supporting Russia’s energy sector.
Russia, however, has dismissed the US pressure and defended its oil exports to Asia as a legitimate and mutually beneficial business. Novak, who is in charge of the country’s energy sector, said that Russia’s oil cooperation with China and India was based on long-term contracts and strategic partnerships. He also said that Russia was not violating international norms or rules by selling its oil to Asian customers.
