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Russian oil is finding its way into the UK in the form of refined fuels, the BBC reported today, citing data from climate NGO the Centre for Research on Energy and Clean Air and a Global Witness report out earlier this month.
Per the data, Russian crude oil exported to India and China, gets refined there and the resulting fuels get exported across the world, including to countries such as the UK that have a ban on Russian energy imports in place.
The likelihood of that happening was pointed out by some oil market observers at the start of the war in the Ukraine when the West first targeted Russia’s energy sector with punitive action. Regardless of the amount and extent of sanctions imposed on Russian oil and gas, it appears that Europe and the U.S. could not overcome a simple obstacle in the form of “rules of origin”.
The rules of origin stipulate that once crude oil is refined into fuels, the country of origin of these fuels is the country where the crude was refined rather than the country where the feedstock originated from. A spokesman for the UK government said as much in comments to the BBC following the release of the data.
The rules of origin are not a secret set of rules—they are publicly known and were the basis, on which industry observers claimed Russian oil will continue flowing into Europe, the UK, and even the U.S., where a loophole recently made possible the arrival of a 10,000-barrel cargo of Russian crude into the country via the Bahamas.
This state of international trade affairs may well have spared Europe from a major fuel crunch seeing as Russia was before the Ukraine war its largest supplier of fuels and finding a replacement for the amount it was getting from Russia was bound to be tough.
Instead, China and India stepped in to replace Europe as top buyers of Russian crude, which they refined locally and then sold to Europe, which ignored where the crude that was used to make the fuels came from.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.