The European Union’s groundbreaking decision to ban nearly all oil from Russia to punish the country for its invasion of Ukraine is a blow to Moscow’s economy, but its effects may be blunted by rising energy prices and other countries willing to buy some of the petroleum, industry experts say.
European Union leaders agreed late Monday to cut Russian oil imports by about 90% over the next six months, a dramatic move that was considered unthinkable just months ago.
The 27-country bloc relies on Russia for 25% of its oil and 40% of its natural gas, and European countries that are even more heavily dependent on Russia had been especially reluctant to act.
European heads of state hailed the decision as a watershed, but analysts were more circumspect.
In addition to retaining some European markets, Russia could sell some of the oil previously bound to Europe to China, India and other customers in Asia, even though it will have to offer discounts, said Chris Weafer, CEO at consulting firm Macro-Advisory, to The Associated Press.
As the European Union countries wrangle to reach a consensus on a total ban on imports of Russia’s crude, India and China have stepped up purchases and are importing record volumes of Russian crude, according to data from energy analytics company Kpler.
In April, Asia overtook Europe as the largest buyer for the first time, and that gap is set to widen in May, according to the data and analytics company.
Oil market analysts said the sharp jump in Russian oil in transit by sea underscores how the global energy trade has been thrown into turmoil by the invasion, with the US, the UK and many EU companies turning their backs on its cargoes and forcing Moscow to look for buyers in Asia. China and India have snapped up millions of barrels from the country to take advantage of hefty discounts on the flows.
In India, cheap Russian crude oil is attracting India’s price-sensitive buyers to the point that Russia became the fourth largest oil supplier to India in April, moving up from the 10th place in March, according to shipment-tracking data compiled by Reuters.
China registered in April its first annual increase in crude oil imports since January as shipments rebounded on the back of higher arrival from Russia, analysts said.
“Some of the interested buyers in Asia are more motivated by economics rather than taking a political stand,” Jane Xie, a senior oil analyst at Kpler in Singapore, told Bloomberg.
However, there is likely to be a limit on how much China and India can realistically buy too, with the two countries already mopping up record amounts of Russian oil that’s steadily been shunned by Europe since the invasion of Ukraine.
(with inputs from agencies)
