A Price Cap Loophole Is Undermining Sanctions On Russian Oil

• A report from the Centre for Research on Energy and Clean Air suggests that a loophole in the G7 price cap is undermining sanctions on Russian oil.
• While the EU, Australia, and most of the G7 countries have banned imports of Russian crude oil, they have increased imports from “laundromat” countries.
• Countries in the price cap coalition have dramatically increased imports of refined oil products from China, Turkey, the UAE, Singapore, and India.

Europe has boosted imports of refined petroleum products from countries that have raised imports of Russian crude oil, as a major loophole in the sanctions risks undermining the effectiveness of the price cap and embargoes, a report from the Centre for Research on Energy and Clean Air (CREA) showed on Wednesday. 

The EU, Australia, and most of the G7 countries have banned direct imports of Russian crude oil, but they have raised indirectly imports of Russian oil by purchasing higher volumes of oil products from countries that have become the biggest buyer of Russia’s crude, the Finland-based center said. 

“These price cap coalition countries have increased imports of refined oil products from countries that have become the largest importers of Russian crude. This is a major loophole that can undermine the impact of the sanctions on Russia,” CREA said in its report.

One year on from Russia’s invasion of Ukraine, the price cap coalition countries raised the imports of refined oil products from China by 94%, Turkey (up 43%), UAE (up 23%), Singapore (up by 33%), and India by 2%.

Price cap coalition countries increased their imports from those countries by 80%, or by $20.5 billion (18.7 billion euros), in the year since Russia’s invasion compared to the prior year.  

“We call these five countries that have increased purchases of Russian oil and “launder” it into products shipped to countries having sanctioned Russian oil the “laundromat” countries,” CREA said.

Europe has recently increased its imports of fuels from India, where refiners have been gorging on cheap Russian crude, Reuters reported earlier this month, quoting preliminary ship-tracking data for the 2022/2023 Indian fiscal year by Vortexa and Kpler.   

Since the embargo on Russian fuels took effect on February 5, European imports of diesel and jet fuel from India have risen to 200,000 barrels per day (bpd), according to Kpler data. That’s up from 154,000 bpd of average Indian fuel imports to Europe before the Russian invasion of Ukraine in February 2022.

By Tsvetana Paraskova for Oilprice.com

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