While Australia, Canada, the United Kingdom and the United States have imposed total bans on oil purchases from Russia, the EU and many other state governments around the world have refused to follow suit. It is believed that imposing sanctions and import bans on Russia will hit its economy hard, encouraging President Putin to pull out of the conflict in Ukraine. However, many governments recognize the importance of Russia’s oil and gas supply as one of the top three crude oil producers in the world. In 2021, Russian oil production totaled 10.5 million bpd, or 14 percent of world supply. Russia exported about 4.7 million bpd of crude oil last year, with China as its main importer with about 1.6 million bpd, while supplying 2.4 million bpd to European countries. In Europe, Germany, Hungary and Bulgaria are some of the countries that continue to buy Russian oil and gas, which make up a large percentage of their energy reserves. Some international energy companies such as Trafigura and Vitol have also said they will hold long-term contracts with Russia to continue buying crude oil. But there are no countries more committed to Russian oil at the moment than India and China. Both countries continue to buy cheap Russian oil as many Western countries reject Russian energy in an anti-conflict stance. In fact, Russian oil exports to India have risen sharply since the invasion, causing its price to fall as international demand for the energy source declines. Experts believe that China will also soon increase imports of Russian crude. The continuing dependence on Russian oil supplies is mainly due to the spike in oil prices in recent months, with governments looking for cheaper options. For China and India, maintaining energy security through access to low-cost oil resources is a top priority. Russia is offering its crude to the Urals at a significant discount to encourage countries to maintain their cooperation with the oil giant as the conflict continues. As the US and other countries around the world refuse to buy Russian oil, it could be left with a surplus of oil stocks by the end of the year if it is unable to sell them in alternative markets. Earlier this month, the International Energy Agency said: “Russia’s Urals crude is being offered at record discounts, but absorption has been limited so far, with Asian oil importers largely clinging to traditional suppliers in the Middle East. Latin America. and Africa. ” “Since mid-March, we see the possibility of 3 million barrels per day of Russian oil supply being stopped from April, but this could increase if restrictions or public condemnation escalate,” the agency said. It is uncertain whether this will continue to be the case or whether the temptation to buy low-cost oil will be too high for some. In India, the government has decided to increase imports of Russian oil. There were no regular imports of crude into India in 2021 and none were recorded after December, but since early March, five Russian oil shipments, about 6 million barrels, have been shipped to India. It is estimated that Russia could offer India a discount of about 20 percent compared to Brent prices, making it very attractive in an era of record high prices and energy shortages. India currently imports between 80 and 85 percent of its crude, which means it is a strong economic decision.
In China, the government has so far refused to denounce Russia’s invasion of Ukraine. This is probably a strategic move to maintain its strong trade relations with Russia. China is the largest importer of oil and gas in the world and in 2021 Russia was China’s second largest oil supplier. China, therefore, continues to rely heavily on Russia for its energy security. There are already indications that China will continue its cooperation with Russia, having maintained oil imports from both Iran and Venezuela despite US sanctions on the two oil-rich countries. So could this be an opportunity for countries wishing to maintain relations with Russia to gain access to cheap energy and consolidate their trade ties? For some, it may be a matter of economy versus politics, with energy security simply too important to condemn Russia’s actions by cutting off oil and gas imports from the country. The EU is likely to follow the steps of the US and other governments to cut off oil imports from Russia, but for China and India, the outlook is less certain. From Felicity Bradstock for Oilprice.com More top readings from Oilprice.com: