Workers inspect pipelines and oil storage tanks
Wang Jianwei/Xinhua via AP
In this photo released by China’s Xinhua News Agency, workers inspect the pipelines and oil storage tanks of a nearly 625-miles-long China and Russia crude oil pipeline in Mohe, northeast China’s Heilongjiang Province on Jan. 1, 2011.

Countries like China and India have the power to undercut the European Union’s latest move to sanction Russia for its invasion of Ukraine, potentially lessening the impact of one the most significant economic actions the west has taken against the nation thus far.  

The EU on Friday officially agreed to ban imports of most oil from Russia, joining countries, including the U.S., who have vowed to forgo oil from the country. 

But experts say the move likely won’t push Russia to economic pariah status, as other countries, including major economies like China and India, will still import its fuels and give the Kremlin an alternate income source.  

“We’re expecting the bulk of the volumes that Russia currently exports to be taken by other markets,” said Alan Gelder, vice president of refining, chemicals and oil markets at energy research firm Wood Mackenzie.  

“If they’re still able to find buyers for their exports, and they’ll need to negotiate a price, it does mean that they’re getting a steady revenue stream. If the world all said no, it would be quite different, but the world is not saying that,” Gelder added.  

Patrick De Haan, head of petroleum analysis at GasBuddy, said that China and India are likely to be even more incentivized to buy oil after the European embargo.  

“The bigger question is, how easy is it going to be for that Russian oil to make it to a country like China and India, which will probably continue to buy?” De Haan said, adding that it’s “kind of shifting oil purchases and consumption around.” 

Further complicating the matter, De Haan said, is that Russian oil is of a quality that makes it desirable in international markets.  

“It’s the heavier oil that distills into more desirable molecules like diesel, which is what Europe is really craving at this point,” he said. 

And Kristine Berzina, head of the geopolitics team at the Alliance for Securing Democracy, said that the fact that the ban doesn’t go into effect right away could also undermine its efficacy by giving Russia more time to adjust.  

She said that alarms in the market may raise oil prices in the near term, giving Russia a benefit as it sells oil for now, and the country will also be able to work with other countries like India that are likely to buy the oil.  

“They can negotiate the pricing there and try to adjust for the fact that they’ll have to go to different markets long term,” she said.  

Ben Cahill, a senior fellow at the Center for Strategic and International Studies, said that despite the limitations, the EU sanctions are probably the most significant action that the world has taken to date to limit the use of Russian oil. 

“This definitely is the most consequential move yet in terms of restricting Russian exports,” he said. “The big question is how much will this knock Russian oil offline and how much will it just redirect Russian oil from Europe to Asia.”  

He estimated that the move could take as much as a million barrels per day of Russian oil out of commission. Last year, Russia exported nearly 5 million barrels per day.  

He added that a provision prohibiting EU companies from insuring the transport of Russian oil could significantly reduce the Kremlin’s sales.

“Any ship that is lifting Russian oil or petroleum products can’t get insurance from either an EU insurance company or U.K. insurance company,” he said, noting that the United Kingdom is also expected to ban this kind of insurance.  

 “If you’re a ship owner, you’ll be very, very reluctant to lift a cargo of Russian crude if you can’t insure it and you could even be blocked from entering some ports,” he said.  

Yet, the world has not gone as far as it possibly can to hamper Russian oil exports. Countries have refrained from implementing “secondary sanctions” in which they would penalize other countries for buying Russian oil.

“We’re not there yet,” Cahill said. “If too much starts to flow to India and China, policymakers may react to that.” 

But given the tight oil market, he warned, “secondary sanctions that really tried to take Russia out of the global oil market would have a huge impact on everyone, and I think it would be extremely controversial and pretty risky.” 

The EU is far more reliant on Russian oil than the U.S. As part of the sanctions package, the EU included a number of exemptions to smooth the transition, including Bulgaria, which will be allowed to import crude and refined oil by sea through the end of 2024 due to its “specific geographical exposure.” Croatia, meanwhile, will be permitted to import the Russian oil needed to operate its refineries through 2023. 

And companies will still be allowed to import the oil via pipeline, providing relief to countries like Hungary and Slovakia.  

However, De Haan added, lack of Russian imports may soon be the least of Europe and the U.S.’s oil woes, as fuel prices around the world soar.  

“I think what’s more concerning here in the last couple of weeks is watching global refined product inventories decline,” he said. “And given how we’ve seen several really, frankly, many refinery shutdowns in the U.S. and Europe over the last three years, I almost wonder if that is going to be a bigger issue moving forward than the European Union cutting off Russian oil.”

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