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Diesel, kerosene and other fuels refined from Russian crude are rising in Europe, prompting Kiev to call for tougher sanctions against Moscow.
In an interview with Politico, Oleg Ustenko, economic adviser to Ukrainian President Volodymyr Zelensky, urged the EU as well as the UK and US to close “loopholes” that allow third countries such as India, China and Turkey to refinance. allows. Crude oil was bought from Moscow’s state energy firms before being sold without restrictions to make petrol, diesel and other products.
In December, the G7 agreed to fix the price of Russian crude at $60 a barrel, meaning sales below that price are allowed. The idea was to pressure Moscow economically while allowing the oil markets to continue to function.
This has resulted in countries like India buying cheap Russian crude and then refining it before selling it to other countries – thereby earning refining margins for local companies.
Indian imports of Russian crude reached an all-time high of 69 million barrels in May, almost ten times higher than the same period in 2021 before Russia’s invasion of Ukraine – and up from 31 million barrels bought in May last year is more than double.
In July, volumes fell to around 50 million barrels, but remain well above pre-war levels.
As a result, Indian exports of fuel products to the European Union have skyrocketed. In June, it exported 5.1 million barrels of diesel and 3.2 million barrels of jet fuel to the block, up from just 1.68 million barrels and 0.51 million barrels, respectively, in June 2021.
Ustenko hit out at India, noting that “before the invasion, they were buying Russian oil but their import levels were very modest, only 1 percent of their imported oil. Now it is at around 40 per cent level, which is indeed a dramatic change.”
For New Delhi, it’s just good business.
In an interview with CNBC last week, India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri admitted that his country’s privately owned refineries are buying Russian crude at rates far below the market price. “If there is a 30 percent discount, the Russians are putting a ribbon around it and shipping it to us for free. That’s what it means.”
It is also having a negative impact on Russia’s bottom line.
Russia’s energy export revenue nearly halved in the first six months of this year, while the ruble has plunged to historic lows in recent weeks as sanctions begin to undermine the fundamentals of the Russian economy.
But as the war takes a toll on Ukraine, Kiev wants to turn the screw even further.
Ustenko said policymakers should support “an embargo on all refined products going to G7 countries” if they are produced using Russian oil, even if they are refined elsewhere.
Ustenko said Kiev wanted to build support among the G7 countries to reduce the price cap to just $30 a barrel. Poland and the Baltic countries pushed for a lower price last year, but countries such as Greece – whose oil tankers transport much of Russian crude – did not agree.
“These steps will be a huge signal to producers that it is completely illegal to touch Russian oil and supply the regime with blood money that they are using to buy weapons and commit war crimes in Ukraine,” Ustenko said. “
However, the idea is unlikely to find much support, at least for the time being.
According to Maximilian Hess, Fellow of the Foreign Policy Research Institute and author of a new book on Russia sanctions, the refining of Russian crude by third countries is not so much a failure of the measures as it is an expected feature.
“Part of the West’s strategy, as the US has repeatedly said, is to keep Russian oil flowing,” he said, while ensuring Moscow earns less for its exports and selling refined fuel instead of crude. Does not earn premium coming from
“There is certainly appetite among some G7 members for a $30 price cap, but banning refined fuel could pose some challenges,” he said.