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The West has taken its most stringent measure to put Russian President Vladimir Putin under financial pressure as the Russia-Ukraine war entered its 10th month. Europe has now banned the imports of most Russian crude oil. Although the oil embargo was agreed upon in May, it came into effect in the European Union (EU) on December 5, according to a CNN report.
The oil embargo was accompanied by a new price cap policy set up by G7 countries. The policy allows countries like India and China to continue buying Russian crude oil but at a price that is no more than $60 per barrel.
Russia has already stated that it would not cooperate with the price cap policy and might cut down its production, which can derail global energy markets.
India, China growing markets for shunned Russian oil
Vital source of revenue
India and other Asian nations are becoming an increasingly vital source of oil revenues for Moscow despite strong pressure from the U.S. not to increase their purchases, as the European Union and other allies cut off energy imports from Russia in line with sanctions over its war on Ukraine.
Such sales are boosting Russian export revenues at a time when Washington and allies are trying to limit financial flows supporting Moscow’s war effort.
Increasing shipments
India, an oil-hungry country of 1.4 billion people, has guzzled nearly 60 million barrels of Russian oil in 2022 so far, compared with 12 million barrels in all of 2021, according to commodity data firm Kpler. Shipments to other Asian countries, like China, have also increased in recent months but to a lesser extent.
Sri Lankan crisis
In an interview with The Associated Press, Sri Lanka’s prime minister said he may be compelled to buy more oil from Russia as he hunts desperately for fuel to keep the country running amid a dire economic crisis.
Prime Minister Ranil Wickremesinghe said Saturday said he would first look to other sources, but would be open to buying more crude from Moscow. In late May, Sri Lanka bought a 90,000-metric-ton (99,000-ton) shipment of Russian crude to restart its only refinery.
Soaring oil prices
Since Russia’s invasion in late February, global oil prices have soared, giving refiners in India and other countries an added incentive to tap oil Moscow is offering them at steep discounts of $30 to $35, compared with Brent crude and other international oil now trading at about $120 per barrel.
India: A top buyer
Their importance to Russia rose after the 27-nation European Union, the main market for fossil fuels that supply most of Moscow’s foreign income, agreed to stop most oil purchases by the end of this year.
“It seems a distinct trend is becoming ingrained now,” said Matt Smith, lead analyst at Kpler tracking Russian oil flows. As shipments of Urals oil to much of Europe are cut, crude is instead flowing to Asia, where India has become the top buyer, followed by China. Ship tracking reports show Turkey is another key destination.
With the oil embargo in place, the EU now prohibits imports of Russian crude oil by sea. Notably, more than 50 per cent of the Russian crude oil was exported to Europe 12 months ago. Europe also received about one-third of its oil imports from Moscow in 2021. The EU, in 2021, imported $24.3 billion of refined oil products and $50.7 billion of crude oil from Russia. And two-thirds of these imports arrived via sea routes. Imports of Russian refined oil products via sea will be banned in February 2023.
However, the oil embargo will not affect the imports via pipeline.
FAQs:
- When did the ban on imports of Russian crude oil in Europe come into effect?
The ban on imports of Russian crude oil into the European Union came into effect on December 5. - Will the oil embargo affect the imports via pipeline?
No. The oil embargo will not affect the imports via pipeline.
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