Recently, when asked at a press conference in the US about India’s oil purchase from Russia, external affairs minister S Jaishankar had said: “If you are looking at energy purchases from Russia, I would suggest that your attention should be focused on Europe.
“We do buy some energy, which is necessary for our energy security. But I suspect looking at the figures, probably our total purchases for the month would be less than what Europe does in an afternoon,” Jaishankar said.
A new report has vindicated Jaishankar’s claim on European nations being the biggest buyers of Russia oil and gas-even after two months of Ukraine invasion.
According to a report by the Centre for Research on Energy and Clean Air (CREA), which is based in Finland and funded through grants and research contracts, Germany was the biggest buyer of Russian energy during the first two months since the start of the war in Ukraine.
The report said that Russia earned $66.5 billion from fossil fuel exports since its troops attacked Ukraine on February 24.
Using data on ship movements, real-time tracking of gas flows through pipelines and estimates based on historical monthly trade, the researchers reckon Germany paid Russia about 9.1 billion euros for fossil fuel deliveries in the first two months of the war.
The German government says it can’t comment on estimates and declines to provide any figures of its own.
Despite volumes being reduced, Russia has actually doubled its revenues from selling fossil fuels to the EU during the two months of war in Ukraine, benefiting from soaring prices. A total of 63 billion euros worth of fossil fuels were exported via shipments and pipelines from Russia since the beginning of the invasion, of which EU imported a whopping 71 percent, worth approximately 44 billion euros, shows data compiled by CREA.
The EU’s share was approximately 30% for coal, 50% for crude oil, 80% for LNG, 70% for oil products and 90% for pipeline gas.
The largest importers in order were Germany (EUR 9.1 billion), Italy (EUR 6.9 billion), China (EUR 6.7bln), Netherlands (EUR 5.6 billion), Turkey (EUR 4.1 billion) and France (EUR3.8bln).
Even though oil deliveries from Russia to foreign ports fell by 20% in the first three weeks of April, compared with the January-February period before the invasion, the increase in fossil fuel prices more than offsets the reduction in volumes.
What this means is that even though exports from Russia have been reduced due to the war and sanctions imposed by Western countries, Russia remains a dominant source of gas. Hence cutting off supplies from the country has only increased prices, which were already high because of low supply as economies recovered from the pandemic.
Although the European Union (EU) announced several sanction packages on Russia, only Russian coal imports have been included in the fifth sanctions package. Several analysts now believe that Berlin must halt the Kremlin’s military ambitions by joining the energy boycott.
“Economic sanctions that undermine the ability, if not the willingness, of the Kremlin to wage war on Ukraine are an essential part of the response to the invasion. These sanctions have however been undermined by continued fossil fuel imports from Russia, particularly to the EU. Europe’s desire to keep the door open to fossil fuel shipments and payments for them has prevented more comprehensive sanctions on Russian banks, financial institutions and trade. The inflow of cash worth hundreds of millions of euros per day has supported the ruble exchange rate and weakened the effect of the sanctions,” said Lauri Myllyvirta, lead analyst at CREA.
Even though the EU and other member states have announced new clean energy and energy efficiency targets, policies and measures, these steps essentially no effect on Russia’s fossil fuel export revenue in the short term.
How Russia’s export volumes are falling:
Deliveries of oil to the EU fell by only 20% and coal by 40%, while deliveries of LNG increased by 20%. EU gas purchases through pipelines increased by 10%.
Oil deliveries to non-EU destinations have increased by 20%, and with major changes in destinations. Deliveries of coal and LNG outside the EU have increased by 30% and 80%,respectively.
Shipping data tracked by CREA shows that Russia is struggling to divert cargoes not taken up by European buyers: there has been a sharp increase in vessels leaving Russian ports without a definite destination (either “for orders” or reporting an intermediate destination such as the Bosphorus or Gibraltar).
What about oil shipments to India?
According to CREA, oil shipments to India and Egypt for Russian exports have attracted a lot of attention, and data shows a clear pick-up from a base of almost zero. However, the shipments to these new destinations are by far not sufficient to make up for even the modest fall in exports to Europe.
Data compiled by oil analytics firm Vortexa shows that Russian crude exports from the Baltic and Black Sea ports are on the rise, with growing volumes heading to and/or signalling for Asia. “Prior to the Russian-Ukraine invasion, only about 100kbd of Russian Baltic and Black Sea crudes were exported to Asia on average. In the recent week, this volume has risen to 800kbd (on a rolling 4-week basis), with 60% declaring for India, another 20% to China and the remaining with no clear country destinations,” said David Wech Chief Economist at Vortexa.
A Reuters compilation also shows that India has bought more than twice as much crude oil from Russia in the two months since its invasion of Ukraine as it did in the whole of 2021, , as Indian refiners snapped up discounted oil that others have shunned.
Refiners in India have placed orders for at least 40 million barrels of Russian oil since the invasion on Feb. 24.That compares with total imports of Russian oil into India of 16 million barrels in the whole of last year.
Point to note: After the US and China, India is the world’s third-largest consumer of oil, over 85% of which is imported. But in 2021, only around 2% of its total oil imports (12 million barrels of Urals crude) came from Russia, according to Kpler, a commodities research group. By far the largest supplies in 2021 came from Middle Eastern oil producers, led by Iraq, with significant quantities also from the US and Nigeria.
Largest importing ports: 6 EU ports were responsible for a quarter of seaborne imports
A quarter of Russia’s fossil fuel shipments arrived in just six EU ports in the first two months of the invasion. The largest ports receiving fossil fuels from Russia are Rotterdam and Maasvlakte in the Netherlands, followed by Trieste in Italy, Gdansk in Poland, and Zeebrugge and Antwerpen in Belgium. Stopping shipments to these ports alone would have eliminated 23% of seaborne demand.
Point to note: Russia in recent days has moved to cut off fossil fuel supplies to Poland and Bulgaria, which has provoked outrage.
Moreover, major oil companies like Shell, Exxon, Total and Trafigura have continued to buy Russian fossil fuels in April. Power utilities and industrial companies importing Russian fossil fuels include RWE, KEPCO, Taipower, Chubu Electric Power, TEPCO, Kyushu Electric Power, Nippon Steel, Tohoku Electric Power, POSCO, Formosa Corporation, Mitsubishi, Hyundai Steel, Sumitomo and JFE Steel.
CREA believes all governments and corporate buyers of Russian fossil fuels need to end all purchases in order to strengthen the effect of the sanctions and help end the war and the crimes against humanity committed by the Russian military.
If a full ban is not possible, countries should institute tariffs on imports from Russia. Sufficiently high tariffs would encourage buyers not to purchase from Russia whenever possible, and curb the price paid to Russian suppliers on spot markets, said Myllyvirta.
He also recommends creating a plan to replace Russian fossil fuels with clean (non-fossil) energy, energy efficiency and energy savings measures as soon as possible. This will be far more impactful than just re-arranging the global trade flows of fossil fuels, and will have far greater economic, health and national security benefits.
(With inputs from agencies)