In Russia’s War on Ukraine, China and India Emerge as Financiers

As Russia seeks to break sanctions shackles, China and India buy large amounts of Russian crude oil and are in the midst of a turbulent war with Ukraine and a geopolitical conflict with the West, Moscow. Has emerged as the central financial institution of.

This is a complex calculation for China, India, and the world economy.

Buying cheap oil from Russia offers economic and political benefits. China can diversify its oil supply for national security reasons, but India can export billions of dollars in refined products such as gasoline and diesel.

But weakening Europe’s and America’s efforts to isolate the Kremlin risks serious fallout that neither country wants. China has avoided overtly supporting Russia’s war in a public statement, and India has described itself as neutral.

Demand from huge domestic markets and supply from vast refineries also play a central role in determining the direction of oil prices. The purchase of Russian crude oil in recent months has helped relieve pressure.

Their ultimate desire for oil in Russia will shake or support the global economy. This is another complex factor in the Western ability to maintain unity through attrition warfare in Ukraine. So far, Western countries have maintained their commitment to Ukraine, but long-term high fuel prices and potential shortages in Europe can be politically unpleasant.

Jason Bordoff, director of the Center for Global Energy Policy at Columbia University, said: And he was an adviser to President Barack Obama.

Russia’s largest export, oil, is the currency of war, funding bullets and rockets deployed on the Ukrainian battlefield. Western nations are trying to break the financial shack by, in part, separating Russia’s largest market, Europe, from energy dependence through sanctions.

Four months after the war, Russia’s crude oil exports declined slightly as sales to China and India almost closed the gap left by Europe. India and China purchased about 2.4 million barrels of Russian crude oil per day in May. This is half of Russia’s exports. At least some are refined into diesel and other fuels and exported worldwide, including those that oppose the aggression.

China and India are buying at a 30% discount on global benchmark prices, benefiting both countries around the world suffering from rising inflation. Despite the discounts, Russia’s oil revenues are rising as prices have risen to over $ 100 a barrel.

The shift is just beginning and the amount of oil involved is still relatively small. When the sanctions come into full force, the real test of China’s and India’s willingness to buy Russian oil will come.

The European ban on tanker delivery of refined fuels such as Russian crude oil and diesel will be phased in over the next six months. This is two-thirds of the continental purchase from Russia.

Sarah Emerson, president of research firm ESAI Energy, said:

China, the world’s largest oil importer, has played a major role in the global energy market for decades. Its main supply depends on the Middle East and Russia.

As the United States became more and more self-sufficient in its energy demand, the arrangement meant that the US Navy patrols the Persian Gulf was effectively protecting China’s supply lines. China gained oil without immersing itself in messy Middle Eastern politics while increasing trade with the United States.

I’m still trying to do the same, balancing economic and geopolitical interests. Importing more Russian oil is not only cheaper, but also helps to diversify the supply.

“China’s actions are in line with its long-standing national security objectives,” said David Goldwin, senior diplomat at the Department of State during the Obama administration’s first term. That is, “to contain Russia by diversifying supply from the Middle East, prioritizing transportation routes that the U.S. Navy cannot block, and increasing its reliance on China as a major oil and gas buyer, all at the lowest possible cost. and.”

This pattern occurred when Russia hijacked Crimea in 2014. When the West imposed sanctions on Moscow, Russian President Vladimir V. Putin flew to China to engage in a decade-long natural gas trade. China negotiated cheap gas and frustrated Western efforts to isolate Moscow without supporting the takeover of the Crimean Peninsula.

Since Russia’s invasion of Ukraine, China has at least publicly taken a delicate path. Chinese state media and government officials are silent about Russian oil, and Chinese oil companies are following the same cautious script.

Erica Downs, a senior research scholar at Columbia University, said:

China’s appetite may also be limited. China has traditionally sought to secure a large number of energy sources. And relations with Russia have long been uncertain, despite a pledge by Chinese leaders of “unlimited” friendship.

“There are no restrictions on cooperation between China and Russia, but there are profits,” China’s ambassador to the United States, Qin Gang, said in a television interview in March. “What matters is the globally recognized international law and norms that govern international relations.”

India’s switch to Russian oil was quick and important.

Before the Ukrainian War, Russia accounted for about 1 percent of India’s oil demand. Russia is poised to overtake Iraq as India’s main oil source this month, according to commodity data company Kpler. According to Kpler data, Russia’s exports to India reached 1.15 million barrels a day in June, rising from 33,000 barrels last year to about 600,000 barrels in March, while Iraq’s shipments per day. It will be reduced to just over 1 million barrels.

For Prime Minister Narendra Modi’s government, a sufficient supply of cheap fuel will help tackle inflation and prevent widespread shortages that have caused violence and political change in nearby Sri Lanka.

Minister of Foreign Affairs of India, S. Jaishankar has repeatedly defended the country’s strategy against growing criticism from Western nations. He said Western sanctions on Iran and isolated policies on Venezuela have reduced options for India as energy prices continue to rise.

“They squeeze all the other oil sources we have, and then everyone says you shouldn’t go on the market and get the best deal for your people.” Mr. Jaishankar said. “I don’t think it’s a very fair approach.”

With a powerful refining capacity of 5 million barrels of fuel per day, India could absorb an additional 350,000 barrels of Russian oil, which is about three-thirds of what it currently imports, according to energy experts. Equivalent to 1. India has already stopped buying oil from Mexico, cut back on buying from Nigeria, and withdrew from Saudi Arabia and the United States.

“A new link in world politics attracted by oil and gas is unfolding around the world,” said Daniel Yergin, author of “New Maps: Energy, Climate, and National Conflicts.” “And China and India are at the center of it.”

Russia’s oil, which is gradually flowing into Asia, is replacing oil in Saudi Arabia and other Middle East countries, and is now flowing into Europe. This change has intensified competition among members of the Organization of Petroleum Exporting Countries, with Iraq significantly lowering prices to Europe.

Saudi Arabia and its Gulf countries see Asia as a growth market and suddenly realize they are crouching. Russia and Saudi Arabia, key players in OPEC Plus, an expanded version of the cartel, have been working together in recent years to control supply and raise prices. Russia has limited options, but it may be necessary to be careful not to be overly dependent on Asia.

Megan L. O’Sullivan, director of the Harvard Kennedy School Energy Geopolitics Project and former aide to President George W. Bush, said: Make Saudi Arabia more willing to take steps that harm Russia’s interests and further reduce global prices. “

Gokoman When Hari Kumar Report that contributed.