2023-05-14 01:34:23
It does not matter that they are banned, Russian fuels continue to reach the European Union. Imports of crude oil and refined petroleum products from Russia may disappear from the European statistical tables after the entry into force, on February 5, of the sanctions that prohibit them. It is possible that, officially, its value will fall to zero and the president of the European Commission, Ursula Von der Leyen, can maintain that, as she stated a few weeks ago, “dependence on Russian gas and oil is history.” But, as the CEO of Repsol, Josu Jon Imaz, pointed out, the reality is very different. “Russian diesel continues in the market,” said the manager during the presentation of the quarterly results of the energy company. Of course, it arrives well camouflaged.
It is impossible to determine where the oil comes from. And the same happens with the products that are derived from it. And that is what facilitates the triangulation that Russian fuels carry out in different countries, and even on the high seas, before reaching European territory. These are operations that leave sweet profits, because Moscow is forced to sell its energy products at bargain prices -up to 20 dollars less per barrel, according to sources in the sector consulted by this newspaper- and the high price of fuels offers a great opportunity to business to intermediaries.
The camouflage of the refined
This is how India has understood it, which has become one of the countries that has increased its imports of Russian crude the most since Vladimir Putin ordered the invasion of Ukraine. New Delhi has not imposed any sanctions on Moscow, so it can buy whatever products it sees fit. It is also not under any sanctions, so it can refine the oil on its territory and sell it as Indian diesel or kerosene.
It’s what it’s doing on a scale never seen before. According to the Russian Deputy Prime Minister, Alexander Novak, India has multiplied its purchases of crude oil by 22 from his country. They have gone from virtually zero to dethroning Iraq as their number one supplier. At the end of last March, Rosneft and the Indian Oil Corporation closed a long-term agreement that will allow the Slavic country to compensate for the losses caused by the sanctions and, if the forecasts of the Kpler and Vortexa platforms come true, the Indian country will end the year importing 2 million barrels of Russian oil per day, no less than 44% of the total.
In parallel, exports of Indian refined products to Europe have gone from an average of 154,000 barrels per day before the invasion to 200,000 barrels since the sanctions on Russian fuels came into force. Kpler estimates that exports will reach 360,000 barrels a day in the coming months, a figure that could make India the main supplier of diesel and kerosene – used mainly in aviation – in Europe, slightly ahead of Saudi Arabia.
CHART 1 Refine It
It is, without a doubt, a magnificent magic trick to avoid sanctions. And other countries have also decided to jump on the bandwagon. The case of Azerbaijan is surprising, which, according to the question posed to the European Parliament by the French deputy François-Xavier Bellamy, is exporting no less than 242,000 barrels a day more than it can produce. And it does so through the BTC pipeline operated by British Petroleum. It is a discrepancy that, according to his writing, should be investigated, because “it could show that the sanctions imposed are being circumvented.” Both Azerbaijan and BP have denied dealing in disguised Russian oil.
The mixture leaves no trace
In any case, Spain has a much closer example: that of Morocco. Unlike what India does, the Muslim neighbor does not refine the crude from Russia because, curiously, the last facilities that could carry out this process in the country closed due to bankruptcy in March 2022. So Morocco already acquires the hydrocarbon ready for sale and mixes it with that of other sources to camouflage the Russian flag. According to Kpler, Rabat has gone from buying 600,000 barrels of Russian fuel per day in 2021 to two million in 2022. And, according to the official Sputnik news agency, Morocco was the destination of 12% of all Russian diesel sales in March. If that volume is added to that of Algeria and Tunisia, the percentage increases to 30%. Another third is purchased by Turkey, which last year doubled its purchases in Russia.
Bearing in mind that the region’s energy needs have not changed substantially, these figures make all their sense when compared with the data on fuel exports, which have skyrocketed proportionally. Although we will have to wait for the official customs statistics for all of 2023 to draw definitive conclusions, the data from Vortexa, which carries out exhaustive tracking of ships, shows that part of this Russian fuel is reaching Spain.
This is confirmed by sources in the sector who ask to remain anonymous and all these operations have also raised more than reasonable suspicions in the Spanish government, which has promised to investigate them. The Minister for the Ecological Transition and the Demographic Challenge, Teresa Ribera, stated a few days ago that all the fuels that arrive in Spain have “the documentation in order”, but added that the Executive “will monitor that they do not come from Russia.” In any case, even Oleg Ustenko, economic adviser to Ukrainian President Volodymyr Zelensky, assured in an interview with Politico that these triangulations do not violate international law. “But they are totally immoral,” he added, which is why he is demanding the closure of these back doors “so that Russia stops receiving this blood money that finances the military machine that is destroying Ukraine and killing its people.”
Offshore transfers
There is a third formula to change the nationality of Russian oil and its derivatives: transfer it into the sea. According to S&P Global, these operations have been multiplied by seven during the first quarter of this year. In March alone, the institute estimates that more than 3.5 million barrels of Russian diesel changed hands off the coast of Greece for larger ships bound for Asia. Many wave the flag of China, a country that has increased Russian fuel imports by 38% during the first three months of 2023.
The United States, Canada and Australia have reported to the International Maritime Organization (IMO) that more and more ships are turning off the transponders that allow their location, apparently to avoid raising suspicions and record the transfers. In a conversation with CNN, the IMO’s head of legal and international affairs, Fred Kenney, acknowledged that this “grey fleet” operates on the margins of the law “and that there are many things that can go wrong in these transfers.” Accidents and polluting spills are more frequent, for example.
At this juncture, the waters near Ceuta also acquire greater relevance. Because, according to data from Vortexa, after ruling out the Atlantic for transfers due to the fierceness of its waters in winter, it is here where oil tankers with Russian crude make their transfers so that the fuel continues on its way to China. There it will be refined and, on some occasions, it could be resold to Europe, the main economic victim of this situation.
“It’s unfair competition”
The triangulation in third countries of Russian crude and refined products on their way to Europe does not violate the sanctions imposed on the Vladimir Putin regime. But industry sources consulted by this newspaper do not consider it legal either. «It is illegal. Because those who carry out these operations know perfectly well that their objective is to evade the sanctions, “they sentence. And they also focus on those who purchase these fuels in Europe. “Because of the cheaper price – the Ural barrel has gone from trading at more than 100 dollars shortly after the invasion to flirting with 50 dollars, 24 less than that of Brent – they may suspect that they are buying a product that comes from Russia », they comment.
This situation benefits intermediary countries such as India or China, allows Russia to continue financing its invasion even though it is forced to offer significant discounts, and affects above all the European oil companies that are governed by the regulations. «Unfair competition is produced comparable to the fraud of operators who do not pay VAT or who do not incorporate the biofuels to which they are obliged and it is detrimental to those who do respect the law. It is not the competition we want, because it is not healthy, “they add.
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