The European Union heavily sanctioned Russia and pledged to boycott its oil, yet continues to buy it, and at an even higher price, albeit indirectly.
India is importing record levels of discounted Russian crude, purchasing it in currencies other than the dollar. India then refines the Russian oil and exports fuel to Europe at a profit.
Meanwhile, increasing energy costs in Europe have stoked inflation, causing workers’ wages to significantly decline.
The real wages of workers in the Eurozone fell by 6.5% between 2020 and 2022.
As of April, Bloomberg reported, European imports of refined fuel from India are approaching 360,000 barrels per day.
This means that India is expected to soon surpass Saudi Arabia as the largest exporter of refined fuel to Europe.
At the same time, India is importing 44% of its oil from Russia, at an all-time high of approximately 2 million barrels per day, according to Bloomberg.
New Delhi is purchasing this crude at a significant discount.
In 2022, the G7 vowed to ban Russian energy. In December, the bloc of Western countries and Japan implemented a price cap on Russian oil of $60 per barrel.
The European Union agreed to the same price cap, before updating it in February with a $45 limit on petroleum products traded at a discount to crude and $100 for petroleum products traded at a premium to crude.
‘The Western economic war has led to a slight decrease in Moscow’s oil revenue, but has simultaneously pushed Russia to deepen its integration with Asia.
An April report by the Kyiv School of Economics, “Russian Oil Exports Under International Sanctions“, analyzed the effects of the G7 and EU price caps in the first quarter of 2023.
This study was sponsored by the Yermak-McFaul Expert Group on Russian Sanctions, which is supported by the Ukrainian and US governments and co-chaired by Andriy Yermak, the head of the office of the president of Ukraine, and Michael McFaul, the former US ambassador to Russia.
It found that Russian oil revenue did decrease by 29%, dropping from $54.5 billion in the fourth quarter of 2022 to $38.8 billion in the first quarter of 2023, for a total loss of $15.7 billion.
However, in the same period, global oil prices fell. The report estimated that $4.2 billion (27%) of Russia’s loss in oil revenue was due to the decline in international prices.
n fact, the study only attributed $6.1 billion (39%) in the loss in Russia’s oil export revenue directly to the sanctions, with an additional $5.2 billion (33%) lost in the discounts that Moscow gave to customers like India.
The Kyiv School of Economics study showed that the vast majority of Russian oil exports now goes to Asia, primarily to China and India
For years, and even throughout much of 2022, Russia had been Europe’s biggest energy supplier. Today, Moscow is looking east
This transition reflects Russia’s increasing economic and political integration with Asia, and its move away from the West
As an example of the sudden shift, the Financial Times noted that Russia’s northwestern port of Primorsk, on the Baltic Sea, had previously been used to send oil to Europe, but in the first quarter of 2023, India bought that crude instead, at a neat discount of just $43.9 per barrel
The EU boycott of Russian energy has also contributed to further de-dollarization
India is largely purchasing Russian oil in currencies other than the US dollar, including the ruble and the UAE’s dirham
“U.S.-led international sanctions on Russia have begun to erode the dollar’s decades-old dominance of international oil trade as most deals with India – Russia’s top outlet for seaborne crude – have been settled in other currencies”, Reuters reported.
(This piece is taken from Geopoliticaleconomy with gratitude.)
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