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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Russia Is Losing The Energy Battle

  • Since the invasion of Ukraine, Russia has lost Europe as an energy customer and is now reduced to China and India for selling its crude oil.
  • Russian gas is neither sanctioned nor embargoed anywhere, but some buyers in North Asia may have become wary of depending on Russian LNG too much. 
  • Kpler: India may have seen the peak crude imports of Russian crude, due to infrastructure constraints and the need to keep good trade relations with other crude oil suppliers.

“Russia has lost the energy battle,” Fatih Birol, Executive Director of the International Energy Agency (IEA), told French newspaper Liberation in March, a year after Russia invaded Ukraine. 

In the year and a half since Putin ordered troops into Ukraine and cut off natural gas supply via pipeline to many EU customers, Europe has managed to replace much of the piped gas with LNG imports, and has banned imports of Russian crude and petroleum products. 

The U.S. has stepped up to fill part of the oil and gas supply gap left by Russia. It was quite a gap, and American oil producers and exporters of LNG have been happy to fill it. 

“Trade flows have been turned on their head with Middle East and the US exporters the key beneficiaries,” Amrita Sen, head of research at consultancy Energy Aspects, told the Financial Times

Russia Loses European Energy Market 

Since the invasion of Ukraine, Russia has lost Europe as an energy customer and is now reduced to China and India for selling its crude oil. China and India are the world’s largest and third-largest crude oil importers, respectively, so the potential Chinese and Indian markets for Russian crude are huge. However, we may have already seen peak Indian crude oil imports from Russia, analysts say. 

Europe, for its part, is buying more oil and gas from the United States and is signing long-term LNG supply deals with U.S. exporters—deals that were not so ‘welcome’ in Europe just two years ago when climate goals were top of developed nations’ energy priorities. 

Russian gas is neither sanctioned nor embargoed anywhere, but some buyers in North Asia may have become wary of depending on Russian LNG too much. 

Before the war and the embargoes on its oil, Russia accounted for nearly 40% of all European imports of crude, refined products, and natural gas. Currently, the EU doesn’t import Russian crude, except Bulgaria, due to an EU derogation until 2024. Natural gas supply via pipelines from Russia now accounts for less than 10% of the EU’s gas supply, down from nearly 40% before the Russian invasion of Ukraine. 

Europe’s single biggest gas supplier now is Western Europe’s top oil and gas producer Norway, a close EU ally and a founding member of NATO.   

Some Asian Customers May Be Nearing Limits For Russia’s Energy

As Europe is shifting away from Russian fossil fuels, Asian customers China and India have become the key customers of Russia’s crude. India’s oil imports from Russia continued to surge in the first half of 2023 as cheaper Russian crude exports find more and more buyers in the world’s third-largest crude oil importer. 

More than a year since the war began, India has turned from a marginal buyer of Russian crude to the most important market for Moscow’s oil alongside China. Indian refiners, not complying with the G7 price cap and looking for cheap opportunistic purchases, have snapped up many of the Russian Urals cargoes, which used to go to northwest Europe before the EU embargo.

But India may have seen the peak crude imports of Russian crude, due to infrastructure constraints and the need to keep good trade relations with other crude oil suppliers, according to analysts at Kpler. 

“India will look to continue Russian crude imports, but perhaps it has reached its limit, hampering any additional barrels,” Janiv Shah, senior analyst at Rystad Energy, told CNBC this week. 

In natural gas, Asia looks to have limited spot purchases of Russia’s LNG, as major buyers in North Asia are estimated to have slashed imports from Russian export projects to the lowest in two years. Buyers are looking to diversify and avoid potential future problems with payments and deliveries, according to Bloomberg

U.S. Oil And Gas Exporters Win   

As buyers in Europe retreated from Russian oil, U.S. crude oil exports to Europe rose and are expected to continue rising. 

Last year, Europe ranked a close second after Asia in terms of U.S. crude oil purchases. European imports of crude from the United States averaged 1.51 million barrels per day (bpd) in 2022, accounting for 42% of American crude exports, just shy of the 43% of U.S. exports that went to Asia, per EIA data.

“EU sanctions implemented in December 2022 that prohibit all seaborne imports of Russia’s oil to Europe make it likely that demand for U.S. crude oil will continue in 2023,” the EIA said earlier this year.  

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“The US came out ahead with rising oil and gas exports and a new multibillion congressionally mandated plan to win in clean tech,” Amy Myers Jaffe, a New York University research professor and energy expert, told FT. 

In the LNG market, Europe and China are in an intensifying competition to sign long-term supply deals with U.S. LNG developers and exporters. 

Long-term LNG contracting has seen a flurry of deals in recent months, including from buyers in Europe, where energy security has taken center stage at the expense of concerns about emissions from natural gas imports. 

For the U.S. LNG developers and exporters, more long-term purchase deals with Europe – and Asia – mean more chances for projects to contract future volumes from planned export facilities and underpin financing and final investment decisions for a greater number of U.S. LNG export terminals.  

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on July 21 2023 said:
    One abiding objective of Fatih Birol, the Executive Director of the IEA is to please his masters in Washington and kowtow to them as low as he physically can, hence his erroneous claim that Russia is losing the energy battle.

    Before I throw his comments to the waste bin, let me first demolish his claims. Russia has already won the energy war against the West decisively and irrevocably by:

    1- Finding new markets for its entire energy exports.

    2- Shifting its oil and gas exports to the Asia-Pacific region which is the vibrant half of the world led-by China with the fastest economic growth and the lowest level of inflation in the world.

    3- Breaking its own pre-Ukraine oil export record of 8.0 million barrels a day (mbd) four times so far in 2023 in January, March April and June at 8.1, 8.3, 8.2 and 8.4 mbd respectively.

    4- Achieving a current account surplus in 2022 of $227 bn and a trade balance surplus of $290 bn.

    And while Russia is yet to replace the EU as its former biggest gas market, it is already on the way to achieve exactly that with its exports to China, India, Turkey and Asian countries soaring.

    Fatih Birol has a proven history of erroneous pontification on energy trends and prices for the sole purpose of depressing oil and gas prices for the benefit of his masters in Washington.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Vlade Cvetanoski on July 21 2023 said:
    Who blew up NS2??
  • Lee James on July 23 2023 said:
    We see widely different interpretations about how well Russia is doing as an energy exporter.

    What is for sure is that a lot of the world is now on-guard regarding dependency on Russia for fuel. Russia clearly weaponizes energy. Russia clearly uses fossil fuel revenue for the kind of global adventurism that the U.S. veered into in the previous couple of decades.

    Putin has leveraged fossil fuel for his special operations. He should have learned from the U.S. experience to avoid such adventurism. Now a lot of the world is attempting to pop his heady bubble about what he can accomplish wielding Russia's oil revenue.

    Oil is a precious resource. We should use it very, very wisely. Unfortunately, it is wastefully burned, and it is used for nefarious purposes, gangster-style, around the world.
  • Tommy Slav on July 24 2023 said:
    Every time an article comes out that tells the truth about russia, or saudi arabia for that matter, like clockwork the village jester Mamdouh Salameh comes along to with some hardcore copium...almost....as if....he is paid....to do that....
  • Walther White on August 16 2023 said:
    Mr Salameh,

    With respect, if Russia is winning the Energy Battle, how do you explain Russia now is posting deficits and the massive decline of,the Ruble.

    *Russia’s fossil fuel export earnings hit the lowest monthly value in June since the beginning of the invasion.
    *Russia’s fossil fuel export revenues fell for the third consecutive month to EUR 591 mn per day in June 2023, 8% lower than May and 18% below April levels.
    * Russian fossil fuel exports to China are down 15% in value terms for June 2023 compared to May, whilst falling by 24% to India compared to the prior month.
    * Russia’s oil export revenues fell to EUR 397 mn per day in June 2023, 7% lower than May and 16% below April levels. Russia’s oil export earnings hit the lowest monthly value in June 2023 since the beginning of their invasion of Ukraine.
    * The Central Bank of Russia raised its key interest rate by 350bps to 12% on August 15, 2023, the highest level since April 2022 and said inflationary pressure is building up.
    * Ruble struggles at All Time low vs USD

    Russia does not look like a winner economically.

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