Two years into the Russia-Ukraine war and following the introduction of a wide array of sanctions, several countries still refuse to cut ties with Moscow, instead benefitting from low-cost oil and gas. Following Russia’s invasion of Ukraine, the U.S., Europe and several other countries decreased their reliance on Russian energy products, developing alternative supply chains and increasing other sources of oil and gas production to meet demand. As they succeeded in this task, they began to introduce sanctions on Russian energy, aimed at harming Russia’s economy and halting its war efforts. However, some countries have used this move away from Russia as a chance to import low-cost oil and gas from Moscow to boost supplies and bolster their economies.
Russian energy export revenues, including those from coal, oil, and gas, have fallen dramatically over the last two years, from over a 14-day running average of $65 million in March 2022 to under $36 million in July 2023. This is largely due to a move away from Russian energy products by many leading world powers. The 14-day running average revenue from Russian exports to the EU fell from $826 million in March 2022 to $75 million in February 2024. While U.S. imports have dropped from $50 million in March 2022 to $0 in February 2024. This shows a strong dedication to the sanctions that have been imposed on Russian energy over the last two years.
While some countries have moved away from Russian energy, others have increased their imports. China increased its 14-day running average imports from $171 million in March 2022 to $267 million in February 2024, while India’s have risen from $5.7 million to $135 million. China and India are now the biggest importers of Russian energy, having overtaken the EU over the last two years. Both Asian countries are primarily importing oil, followed by gas and coal. Turkey has also increased its imports of Russian energy to be on par with the EU.
India’s Prime Minister Modi has repeatedly stated that the country intends to continue buying Russian energy products so long as the price is competitive. Despite announcing several ambitious climate pledges, India continues to rely heavily on oil and coal, with demand expected to increase in line with population growth and industrialisation. During several climate summits in recent years, the Indian government has asked high-income countries and development banks to support its aim of transitioning away from fossil fuels to renewable alternatives by investing in its green energy sector in line with the national strategy. With insufficient levels of foreign investment in India’s renewable energy sector so far, the government is committed to supplying low-cost energy to its population to support the country’s economy.
India has been criticised for continuing to buy Russian energy in the face of sanctions introduced by the U.S. and EU. However, India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri believes the world is happy that it is buying its oil from Russia rather from than alternative sources, such as the Middle East, as it is helping to keep international oil prices low. Russian crude now accounts for around 35 percent of India’s oil imports. This has helped reduce India’s imports of Middle Eastern crude.
The introduction of sanctions on Russian energy products was intended to massively decrease Moscow’s oil and gas revenues to cripple its war efforts in Ukraine. However, as China and India continue to invest heavily in Russian energy, revenues have remained high. Russia earned $37 billion in crude sales to India in 2023, as the South Asian country increased its oil imports from Russia by 13 times since before the war. This is concerning for the U.S., which is a strategic partner with India. Russian crude sales to India are not subject to sanctions, making them legitimate. However, it is thought that a large amount of Russian oil was still refined in India and exported to the U.S., at a value of over $1 billion.
Meanwhile, China’s spending on Russian energy imports reached almost $60 billion since the beginning of the war. China has imported a range of Russian energy products at a discounted rate, as Moscow sought to establish new trade partners in the face of the strict sanctions imposed by its existing importers. China has benefitted from low-cost energy imports from Russia, with oil discounts having contributed to a decrease in China’s energy bill by an estimated $18 billion.
While several countries worldwide have reshaped their energy trade to reduce their reliance on Russian energy products, other countries have deepened ties with Moscow to benefit from the energy prices Russia is offering. This has helped countries, such as China and India, decrease their energy bills and ensure their supply. It has also led to a fall in oil prices, as India has reduced its Middle Eastern oil imports. This has had a significant impact on Russian energy revenues and has greatly undermined the efforts of the U.S. and EU sanctions, thereby strengthening Russia’s war efforts.
By Felicity Bradstock for Oilprice.com
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