Without the EU, Russia is still rich thanks to good friends; oil giants also "join the club" to buy at bargain prices

India is not the only country buying Russian oil, processing it and exporting it to other countries. West Asian oil giants, led by Saudi Arabia, are buying millions of barrels of Russian diesel, which is banned in Europe, to sell to buyers in the European Union (EU).

Saudi Arabia has become a major importer of Russian oil. (Source: FILE)

India increases purchases of Russian oil

India - the world's third-largest crude oil consumer and importer - is exporting Russian oil, after refining, to countries in Europe and Asia.

India imported 1.96 million barrels of oil per day from Russia last month, up 15% from April, setting a new record, according to data from Vortexa. The average cost of buying a barrel of Russian crude, including transportation costs to Indian shores, was $68.21 per barrel in April, the lowest since the country began buying large volumes of crude from Russia.

Previously, India hardly imported crude oil from Russia. Huge transportation costs made Russian crude very expensive compared to India's neighboring imports from West Asia.

India's first private sector refinery at Jamnagar in Gujarat - built by Reliance Industries (RIL) - has been using imported crude, mainly from West Asian suppliers, to produce refined products for export purposes.

India's crude oil imports from Russia were less than 1% of its total oil imports so far in 2020-21. In the first 10 months of 2020-21, India bought just 419,000 tonnes of crude oil from Russia, accounting for 0.2% of its total imports of 175.9 million tonnes.

India exported refined petroleum products worth $49 billion in 2021, making it the world’s third-largest refined petroleum exporter. The main export destinations were Singapore ($4.59 billion), the United States ($3.56 billion), the Netherlands ($2.89 billion) and Australia ($2.62 billion).

India's fastest-growing refined petroleum export markets in 2020 and 2021 - the period before the military operation - were the US, Australia and Togo.

The situation changed after Russia's special military operation in Ukraine began in February last year. Western financial and trade sanctions against Russia forced the country to sell its oil and other products at deep discounts.

Oil imports suddenly became much cheaper from Russia. This prompted India to turn to Russian crude as its energy market is 87% dependent on imported oil.

Cheap Russian crude and higher export demand for refined products have boosted India’s refined petroleum product exports. India’s crude oil imports in the last fiscal year were estimated at $158.3 billion, up from $120.7 billion a year earlier. Last year, Russia became India’s top crude oil supplier, displacing Iraq for the first time.

Russia has become India's top crude oil supplier. (Source: AP)

Oil giants also "join the club"

Notably, Saudi Arabia - one of the countries with the largest oil reserves in the world and earning billions of dollars from oil exports each year - has also become a major importer of Russian oil. Saudi Arabia has been exporting refined petroleum, ethylene and propylene polymers to China, India, Japan, South Korea and the UAE.

Despite opposition from the United States, oil-rich Gulf states are taking advantage of falling Russian oil prices. Saudi Arabia and the United Arab Emirates (UAE) are importing cheap Russian oil to boost higher-priced exports to Europe.

The only reason Saudi Arabia and the UAE are importing large amounts of oil from Russia is to take advantage of the price differential. Over the past few months, the two oil giants have imported record amounts of oil from Moscow. And Russian oil is entering the EU via Saudi Arabia and the UAE – two reliable West Asian allies of the US.

Saudi Arabia imported 174,000 barrels of diesel and gas oil per day from Russia in April 2023 and even more in March 2023, according to data compiled by Bloomberg from analytics firm Kpler.

The news agency revealed that about 35% of Saudi Arabia's total diesel exports in April 2023 were shipped to the European Union (EU) and the UK. Saudi Arabia has replaced Russia as Europe's main supplier since February this year.

Meanwhile, Reuters news agency said, Saudi Arabia has taken advantage of the refining profit strategy by importing a significant amount of Russian diesel at low prices and shipping record amounts to Singapore, where it can generate higher profit margins.

Saudi Arabia's Aramco seized the opportunity to boost diesel exports to Singapore to a record in May, industry analysts and traders say.

The shift to the Asian market has allowed Aramco to earn higher net profits due to lower supplies in Asia during the maintenance season, while also taking advantage of relatively tight diesel supplies in Singapore due to refinery maintenance issues in the region.

The Northlines commented that the fact that some US allies in West Asia trade Russian oil to the EU through the "back door" shows that Western sanctions on the energy sector still have loopholes.

Western countries have been trying to cut Russia’s oil and gas revenues, but have not been very successful. The EU and the Group of Seven (G7) have set a maximum price of $60 a barrel for Russian crude.

Notably, the EU has not imposed sanctions on Russian gas because Europe is heavily dependent on Russian supplies.

Thanks to “good friends” like China, India, Saudi Arabia, the UAE and Iran, Russia achieved a record current account surplus of $227 billion in 2022. As imports fell, Russia’s trade balance increased to $282.3 billion last year, from $170.1 billion the year before.

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