Russia finds new oil buyers, but at a high cost

2023-05-10 17:11:36, Kosova & Bota CNA

Russian crude oil shipments have hit their highest levels since the start of 2022, according to a report from Bloomberg, despite Western sanctions imposed after the Kremlin's aggression against Ukraine. As Voice of America correspondent Henry Ridgwell reports, Russia has found new buyers outside Europe, but with very small profits.

Russia traded an average of 3.66 million barrels of crude oil per day in the four weeks to May 5, according to figures compiled by Bloomberg. This is the highest level since the start of 2022. Almost all the oil is being sent to China and India and smaller amounts to Egypt and Turkey.

Before the aggression in Ukraine, in February 2022, Russia sold 1.5 million barrels of oil per day to the European Union. But European countries have reduced purchases to almost zero. Only Bulgaria imports Russian crude oil.

"Russian oil imports from the EU have been completely replaced by Egyptian and Indian imports. Russia has found other buyers and the EU, on the other hand, has looked for other sources and has also found them", Stefan Legge with the University of St. Gallen in Switzerland.

Despite finding new buyers, Russia's oil revenues have shrunk by two-thirds. Western sanctions and a $60-a-barrel price cap on Russian oil are squeezing profits. The Kremlin said last week that export earnings fell 67 percent last month, to $6.4 billion.

"The data show that Russia is suffering. They have found new buyers of oil, but at a lower price. Russian oil is traded at a discount compared to other types of oil. The new buyers are not as attractive as the old ones," says Stefan Legge with the University of St. Gallen.

New buyers are also much further away, with average transit times of 16 to 18 days, compared with four to six days for pre-war shipments to Russia's European neighbors, according to the Reuters news agency.

"There are negative costs and prices will generally increase. It also brings environmental damage when talking about pollution caused by carbon dioxide. According to Putin's calculations, Western countries would not be willing to bear these costs. But when more than a year has passed, Western countries are willing to accept part of the cost," says Stefan Legge with the University of St. Gallen.

The West is trying to persuade allies like India to import less Russian oil.

"Of course, they are sovereign countries and they have their own interests. But the West intends to make this second alternative as difficult as possible for Russia. This will have limited success, as history and today's economic analysis show us," says Mr. Legge.

Analysts say some Russian oil is still likely to enter European markets. Crude oil is difficult to trace as it can easily be mixed with other shipments at transit locations, or at sea. The complexity of transport companies and the identification of ships makes the implementation of sanctions even more difficult./ VOA