Redux: USA Strategic Petroleum Reserve Refilled with Putin's Oil & USA Buys Russian Refined Oil Products
Global Shell Game: Russia, Iran, and Venezuela Dodge Sanctions
Recently it was announced that the Biden administration has started to refill the SPR. It is highly likely that some of this oil is laundered and of Russian origin.
Part 1: Putin’s Russian embargoed oil is distributed worldwide by mixing with non-embargoed oil and via covert “dark fleets” of tankers
Part 2: refined oil products from Putin’s Oil are also sold and distributed worldwide by India and China via “oil laundering schemes” worthy of a John Le Carre or Daniel Silva Novel
Part 1: Laundering Russian Crude Oil by Blending with Legitimate Unsanctioned Oil
US oil refineries could unknowingly use embargoed Russian oil in a scheme where crude oil from that country is mixed with non-embargoed oil and shipped to the US, a process one energy analyst compared to money laundering - Clay Seigle, a Houston-based macro energy strategist discusses the “shell game” as oil makes it’s way around the world and it’s identity can change.
“The changes I’m seeing in Russian oil export behavior are more diversions, more oil on the water without clear destinations, indicat(ing) some Russian barrels are struggling to find homes among buyers, and suggest(ing) some ship operators are trying to keep their destinations discreet,” Seigle said.
The diversion of Russian oil has increased since the Biden administration announced the embargo on 8 March in response to the Russia's 24 February invasion of Ukraine. Currently, ships are being rerouted from the US to oil terminals located in Caribbean nations, including the Bahamas, Saint Croix and St. Eustatius. What happens next, explained Seigle, is chapter that is worthy of a John Le Carre or Daniel Silva novel.
Russian crude, which cannot legally enter the US, could be placed in oil storage tanks with oil from other non-banned countries. When the oil is reloaded, the ship tracking platform will only read the ship was loaded in the Bahamas or St. Eustatius and its destination is a US port, thus losing the visibility of its origin, Seigle said.
Another way Russia could bypass the embargo is by deploying a ship-to-ship transfer. Seigle explained this is where Russian crude is transferred from one ship to another in a mid-ocean transfer. Shipping documents would show the crude had a non-Russian origin, he explained.
“To enforce the ban, regulators will need to certify that imported oil did not come from Russia. Even well-intentioned traders could make a mistake, while bad actors could try to ‘launder’ Russian oil to conceal its true origin,” Seigle said. “Commodity-tracking technologies should be repurposed for this specific task, to prevent Russian oil from going into stealth mode.”
Part 2: Laundering Russian Oil by Refining and Export of Refined Products
Western countries that have largely banned the imports of oil from Russia imported EUR 42 billion worth of oil products from countries that have increased imports of Russian crude oil in the 12 month period since Russia’s invasion.
Well into the second year of the full-scale invasion of Ukraine, the EU, most of the G7 countries, and Australia have cracked down on their imports of Russian crude oil and oil products. At the same time, these countries, which are all part of the price-cap coalition whose objective is to limit Russia’s revenues from fossil fuel exports, have increased imports of refined oil products by leaps and bounds from the countries that have become the largest importers of Russian crude oil.
This CREA report takes an in-depth look at the laundering of Russian oil by countries importing Russian crude and then selling oil products on to price-cap coalition countries that have sanctioned Russian oil.
CREA key findings are:
The EU, most of G7 and Australia have banned or limited imports of Russian crude oil and oil products, leading to a significant fall in Russia’s oil prices and export revenues. However, these price cap coalition countries have increased imports of refined oil products from countries that have become the largest importers of Russian crude. This is a major loophole that can undermine the impact of the sanctions on Russia.
One year on from Russia’s invasion of Ukraine, the price cap coalition countries increased the imports of refined oil products from China (+3.6 million tonnes or +94%), India (+0.3 million tonnes or +2%), Turkey (+1.8 million tonnes or +43%), UAE (+2.6 million tonnes or +23%) and Singapore (+1.8 million tonnes or +33%). Price cap coalition countries’ imports of refined oil products from these five countries rose by +10 million tonnes (+26%) or EUR 18.7 bln (+80% in value terms) in the year since Russia’s invasion compared to the prior year. We call these five countries that have increased purchases of Russian oil and “launder” it into products shipped to countries having sanctioned Russian oil the “laundromat” countries.
Among the price cap coalition, the largest importer of oil products from the laundromat countries was the EU, whose imports amounted to EUR 17.7 bln. Australia purchased EUR 8.0 bln worth in the 12 month period since Russia’s invasion, followed by the USA (EUR 6.6 bln), the UK (EUR 5.0 bln) and Japan (EUR 4.8 bln). The highest proportions of imported oil products into oil price cap coalition countries were diesel (29%), jet fuel (23%) and gasoil (13%).
China’s monthly exports of oil products to Europe and Australia spiked in late 2022, far above historical levels. In the lead up to sanctions on Russian oil, China significantly increased its oil products exports, reaching 2.9 million tonnes in Q4 of 2022 which was 150% higher than the quarterly average in 2022.
In the year following the start of the invasion, seaborne imports of Russian crude oil into China, India, Turkey, United Arab Emirates (UAE) and Singapore increased by 140% in volume terms, compared with the 12 month period before the invasion. The total value of their imports was EUR 74.8 bln over the twelve months, and since the EU crude oil ban until one year after the start of the war, these five laundromat countries have made up 70% of Russia’s crude oil exports.
As Russia is forced to offer discounted oil to ensure it is able to find buyers, the laundromat countries are refining larger volumes of imported Russian crude to then export the refined products to sanction imposing countries (+10 mln tonnes or +26% of refined oil products exported to price cap coalition countries one year post invasion compared to the prior 12 months). This is currently a legal way of exporting oil products to countries that are imposing sanctions on Russia as the product origin has been changed. This process provides funds to Putin’s war chest.
The price cap coalition countries are responsible for the vast majority of the increase in laundromat countries’ exports of oil products since the start of Russia’s invasion. Laundromat countries’ exports of oil products increased 80% in value terms and 26% in volume terms (selling an additional +10 million tonnes) to price cap coalition countries, but only rose 2% (or +2.9 million tonnes) to non-price cap countries in the year since the invasion on prior year levels.
Since the imposition of the crude oil price cap (5 December 2022) up to one year after the invasion (24 February 2023), India (3.8 million tonnes) was the largest exporter of oil products to price cap coalition countries, followed by China (3.0 million tonnes) and UAE (2.9 million tonnes).
The Indian port of Sikka is the biggest oil product export port to the price cap coalition countries, and the largest importing port in the world of seaborne crude oil from Russia. The port serves the Jamnagar refinery. EUR 2.7 bln of petroleum products have been exported from that location to price cap coalition countries since December 2022 to February 2023.
Overall, the PetroChina Dalian refinery in China is the largest recipient of Russian crude oil in the world, due to a pipeline connection to Russia. The main export destination for oil products from Dalian is Australia.
56% of Russian crude oil shipped to laundromat countries has been transported by vessels owned and/or insured by the price cap coalition countries since December 2022 up until the anniversary of Russia’s invasion of Ukraine. This share is 74% for oil products exported from laundromat countries from December 2022 until the anniversary. This illustrates the coalition’s strong leverage to ratchet down the price cap level as well as taking action to ban refineries buying Russian crude to refine it and sell the products to sanctioning countries.
Kind of like China producing products, then shipping those products to Vietnam, where they are labeled, Made in Vietnam, so other countries will buy them.
This info that you present here should be plastered on our faces by the media. But the media is an agent of the state. It’s up to all of us to know what our nefarious government does. If for no reason to protect your children.
And the EU is a disgraceful socialist entity. Every time one of our socialists says they wasn’t to emulate the EU I cringe in a major way.
Great article - thank you. Yes these countries will sell, no matter what.. always have, sanctions or not. Oil is the new drug. It's sad that we just don't seem to care and buy it anyway. We could refill the SPR, which we should not have depleted in the first place, from our own oil, but why support our own economy?