In just three months since it invaded Ukraine, Russia has earned $24 billion from oil sales to China and India, illustrating how rising global prices are restricting U.S. and European efforts to penalize President Vladimir Putin.
In the three months leading up to the end of May, China paid $18.9 billion on Russian oil, gas, and coal, almost double the amount spent a year earlier, according to the most recent customs data. During the same period, India spent $5,1 billion, more than five times the amount spent a year ago. This is an increase of $13 billion in revenue from both nations compared to the same months in 2021.
The increased spending is helping to compensate for lower purchases from the United States and a few other nations, who have ceased or slowed purchasing to punish Russia for the war. The bans have caused alternative supply prices to skyrocket and triggered debilitating inflation, threatening to plunge major nations into a recession.
Since the outbreak of war, Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air, has been monitoring Russian energy flows. “China is already purchasing virtually all of the energy that Russia can export via pipelines and Pacific ports,” Myllyvirta said. “India has been the primary purchaser of Atlantic cargoes that Europe no longer desires.”
Despite the enormous discounts to global benchmarks that Russia offers to attract buyers, energy prices are significantly higher than last year, making it unlikely that this buying spree will end soon. On a volume basis, China’s imports continued their steady ascent in June, while India may be incentivized to increase purchases even further in the coming months as a European Union ban on Russian oil goes into effect, according to Myllyvirta.
Russia has long-standing commercial and geopolitical ties with China and India, and in addition to offering high price reductions and taking payments in local currency, it is also offering steep price discounts to assist keep trade flows to the two countries robust this year.
According to Myllyvirta’s analysis, China and India continue to lag behind Europe as a bloc in terms of overall sales for the current year. Nonetheless, Europe’s imports will continue to decline as import restrictions on coal and oil take effect and Russia cuts off gas supplies to some European clients.
China is the world’s largest energy importer and has pipelines dedicated to Siberian oil and gas. Even as its energy use decreased during the first half of 2022, partly owing to Covid-19 lockdowns, it spent much more on Russian energy due to increased costs and modest volume increases.
Since it does not share a land border with Russia and its ports are typically too far away for cost-effective shipping, India’s surge in spending after the war has been far more substantial. From February 24 to June 30, the country spent $8.8 billion on gasoline and coal imports, more than it did for all Russian commodities in 2021, according to a commerce ministry official who sought anonymity because the data is not public. The spokeswoman for India’s trade ministry declined to comment.
In addition to significant increases in oil and coal imports, India has received three cargoes of Russian liquefied natural gas since the start of the conflict, compared to just one cargo during the same period last year, according to ship-tracking data from Bloomberg.
Wei Cheong Ho, a Rystad Energy analyst, said in a research note last month, “Historically, India has imported very little Russian oil, but the war in Ukraine and EU oil embargoes on Russian-origin oil has led to a rebalancing of oil trade flows.”