Since Russia invaded Ukraine in late February, several countries have imposed sanctions on the country, restricted trade and halted Russian energy imports. This has led to severe shortages of oil and gas around the world. But some governments are using the situation as an opportunity to forge closer ties with Russia, while its vast oil and gas supplies are less in demand, providing countries with low-cost energy imports.
While Australia, Canada, the UK and the US have imposed complete bans on Russian oil purchases, the European Union and several other state governments around the world have refused to follow suit. It is believed that imposing sanctions and import sanctions on Russia would severely damage its economy, prompting President Putin to pull out of the conflict in Ukraine. However, many governments recognize the importance of Russian oil and gas supplies as one of the top three crude producers worldwide.
In 2021, Russian oil production totaled 10.5 million bpd, a total of . was equal to 14 percent of global supply, Russia exported about 4.7 million bpd of crude last year, with China being the main importer with about 1.6 million bpd, while it supplied 2.4 million bpd to European countries.
are in Europe, Germany, Hungary and Bulgaria Some countries continue to buy Russian oil and gas, which makes up a substantial portion of their energy supply. Some energy international companies such as Trafigura and Vitol have also said they will maintain long-term contracts with Russia to continue their crude oil purchases.
But at present there is no country more devoted to Russian oil than India and China. Both countries continue to buy cheap Russian oil as many Western countries reject Russian energy in a stand against the conflict. In fact, Russian oil exports to India have increased substantially as its price has fallen along with it as international demand for the energy source has shrunk. Experts believe that China will soon increase the import of Russian crude oil.
The ongoing reliance on Russian oil supplies is mainly in response to rising oil prices in recent months, prompting governments to look for the cheapest alternatives. For China and India, maintaining energy security by accessing low-cost oil sources is a top priority.
RELATED: Saudi Arabia hikes oil prices despite record discount for Russian crude
Russia is offering its Urals crude at a significant discount to encourage countries to maintain their partnership with the oil giant as the conflict continues. As the US and other countries around the world refuse to buy Russian oil, it could be left with an excess of oil supplies by the end of the year if it is not able to sell them in alternative markets.
earlier this month “Crude oil from Russia is being offered at a record discount, but so far, with Asian oil importers sticking to conventional suppliers in the Middle East, Latin America and Africa,” the International Energy Agency said. And “by mid-March, we see a potential shutdown of 3 million barrels per day of Russian oil supplies starting in April, but this could increase if sanctions or public condemnation increase,” the organization said,
It is uncertain whether this will continue or whether the temptation to buy low-cost oil will be too high for some. In India, the government has decided to increase its imports of Russian oil. There were no regular imports of crude oil into India in 2021 and none registered after December, but since early March, five Russian oil cargoes, about 6 million barrels, have been sent to India. It is believed that Russia may offer India a discount of around 20 per cent compared to Brent prices, making it very attractive in times of record-high prices and energy crunch. India currently imports between 80 and 85 percent of its crude oil, which means it’s a sound economic decision.
In China, the government has so far, refused to condemn the Russian invasion of Ukraine. This is likely to be a strategic move to maintain its strong business ties with Russia. China is the world’s largest importer of oil and natural gas, and in 2021 Russia belonged to China second largest oil supplier, That is why China is heavily dependent on Russia for its energy security. There is already evidence to suggest that China will continue its partnership with Russia after maintaining its oil imports from both Iran and Venezuela despite US sanctions on the two oil-rich states.
So, could this be an opportunity for countries wishing to maintain ties with Russia to get cheaper energy and strengthen their trade ties? For some, it may be a question of economics versus politics, as energy security is too important to condemn Russia’s actions by cutting its oil and gas imports from the country. The EU will follow US and other government actions to curb oil imports from Russia, but for China and India, the outlook is not so certain.
By Felicity Bradstock for Oilprice.com
Read more from Oilprice.com: