by F. M .SHAKIL
Despite western sanctions, there is more Russian fuel being exported around the world than before the Ukraine crisis. It’s just coming via Saudi Arabia, India, China, and other trading states – with steep commissions.
Despite western sanctions imposed on Russia over the Ukraine conflict, some Asian and specifically West Asian economies are importing significant amounts of Russian gasoline at discounted prices, and reselling it with windfall profits to the EU under their brand names.
Western sanctions have forced Moscow to actively diversify its energy exports – oil and gas exports accounted for 45 percent of the Russian government’s 2022 budget – and it has rapidly filled the gap left by its diminished oil exports to Europe with new customers in China, India, and the Persian Gulf nations.
Despite the EU’s prohibition on seaborne exports, during the initial quarter of the current year, Russian seaborne crude oil exports amounted to 3.5 million barrels per day (bpd), surpassing the 3.35 million bpd recorded at the onset of the Ukrainian conflict a year ago.
According to industry analysts and oil executives, this has transpired despite western sanctions that led to the severance of several active trading partnerships for Russian oil in the EU markets.
Finding ways around sanctions
Dubai-based oil tycoon Hakam Valliani tells The Cradle that, in general, sanctions did not significantly impact the Russian gasoline supply line as new buyers filled the gap left by the EU market. Washington, he says, had enforced these limitations to force the EU to buy expensive US gasoline rather than cheaper Russian oil.
When compared to Russian liquefied natural gas (LNG), the price of US LNG is nearly $1,000 per ton more expensive, so “the European Union is paying a disproportionately huge amount for the US stuff,” Valliani explains.
“Sanctions or no sanctions, individuals will find a way around by devising cunning strategies to bypass restrictions,” he says, adding:
“This is scary to see that the entire American-based price benchmark and the SWIFT system are collapsing, and a new benchmark will be needed within the next five years. Russia now accepts a variety of currencies when transacting fuel sales, including Indian rupees, Chinese renminbi, and other regional currencies.”
Valliani predicts that with the expansion of BRICS ( to BRICS+), there will be a decline in the value of the dollar and the collapse of the International Monetary Fund (IMF): “The world’s future source of gold and oil will come from BRICS+.”
This has allowed countries like Saudi Arabia, the UAE, China, India, and Iran to import the majority of Russian oil, not for domestic consumption, but to transport it to third parties in energy-deficient markets in Europe and Asia.
Saudi import of Russian crude
According to Reuters, Saudi Arabia has been importing unprecedented quantities of Russian fuel to circumvent US sanctions. Traders have also taken advantage of lower prices to build up fuel reserves at the Fujairah hub, located in the UAE.
Today, West Asia is playing an increasingly important role as a supplier of industrial fuel to Europe and Africa, with Saudi Arabia, Kuwait, and Russia contributing to the fuel reserves in Asia.
As the largest producer within OPEC and the top global oil exporter, Saudi Arabia has had to step up its global energy supply – while keeping its own production down, per OPEC+ decisions – due to US-imposed restrictions on direct imports of Russian crude oil and oil products.
In March and early April of this year, Saudi Arabia imported a record high 261,000 metric tons of Russian diesel. Three of the containers were unloaded in Jeddah, while one was delivered to Ras Tanura. The free-on-board price range for Russian diesel cargoes scheduled to load in March ranged from $60 to $70 per barrel.
This price is nearly $20 per barrel lower than the “Middle East benchmark,” which falls below the price ceiling of $100 per barrel set by the G7 consortium, thereby allowing traders to utilize western vessels and insurance services to transport Russian fuel.
West Asia wins
Recent findings from the Center for Global Energy Policy at Columbia University have alerted the European Commission that oil-exporting nations in West Asia have largely benefited from the conflict in Ukraine.
The study examines the implications of increased imports of Russian petroleum by West Asian countries, which has manifested itself predominantly through price increases and created an opportunity for the refining, storage, and distribution of Russian petroleum.
According to analysts, the primary exporters from the Persian Gulf region, such as Saudi Arabia and the UAE, will become “balancers-in-chief in Europe,” providing a supply of petroleum to the continent.
Perturbed by Saudi Arabia’s imports of Russian diesel and its subsequent re-export to Europe, the EU parliament has been compelled to start a discussion about the new phenomenon and investigate “what evidence the Commission has to support its claim that diesel fuel imported from Saudi Arabia to the European Union is not simply rebranded Russian crude oil?”
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