Refined Russian oil continues to flow to Britain through a loophole - BBC
Kyiv • UNN
The United Kingdom continues to indirectly import millions of barrels of Russian oil each year through petroleum products refined from Russian crude oil in countries such as India, which are then exported to the UK, undermining Western sanctions aimed at limiting Russian oil revenues.
A BBC study claims that millions of barrels of fuel made from Russian oil are still being imported into the UK despite the sanctions. In particular, at least three refineries in India are involved in the supply of petroleum products to Britain made from Russian oil, UNN reports.
Details
The Russians have found a "loophole". They refine their oil in countries such as India and China, and the products are sold to the UK.
This is not illegal and does not violate the UK's ban on Russian oil, BBC journalists note. However, this undermines the idea of sanctions aimed at limiting Russia's earnings. After all, Russia uses the proceeds from its exports for military purposes, including waging war on the territory of Ukraine.
The UK government has denied any imports of Russian oil from 2022. However, the spokesperson noted that internationally recognized "rules of origin" determine that oil refined in another country is classified for trade purposes as originating in the country of refining.
Bryan Mueller, Co-Chair of the International Trade and Customs Group at Bird & Bird, explained that under the current rules, Russian crude oil refined in a country such as India is classified as Indian.
The change of origin is determined on the basis of significant processing. ...If Russian petroleum products are substantially refined from water in a jurisdiction other than the Russian Federation, they are no longer considered to originate in the Russian Federation.
The Center for Research on Energy and Clean Air (CREA) noted that this "oil refining loophole" allows countries such as India and China, which have not imposed sanctions on the Kremlin, to legally import Russian crude oil and refine it into petroleum products such as jet fuel and diesel. And then export these products to the UK and the EU.
The problem with this loophole is that it increases the demand for Russian oil and allows for more sales, as well as a higher price, which increases the funds that go into the Kremlin's war chest.
An oil industry source added that since the UK is not self-sufficient in diesel, it has to buy it somewhere, and if it doesn't get it from India, it risks paying a higher price elsewhere and passing the cost on to the consumer.
Mr. Smith said that while the so-called loophole undermines sanctions, the situation was complicated.
It is impossible to remove Russian oil or products made from Russian materials from the world market. ...Russia is also such a key player that the authorities do not want to completely eradicate Russian supply from the world market, as this would lead to a sharp rise in prices.
In a separate research paper, the advocacy group Global Witness estimated that in 2023, the UK imported about 5.2 million barrels of petroleum products made from Russian crude oil.
The majority of the imported fuel - 4.6 million barrels - is jet fuel, which, according to researchers, was used in one of 20 flights in the UK.
The British government, while publicly condemning the war in Ukraine, remains complicit in the sale of Russian oil, keeping this loophole in oil refining open. Every pound spent on Russian oil helps Putin pay for his war of aggression.
Exclusive figures provided to the BBC by CREA show that during the first 12 months of the Russian oil ban from December 2022, around £569 million of UK imports were sourced from Russian crude oil.
Both reports claimed that the so-called loophole indirectly provided the Kremlin with more than £100 million in tax revenues.
They also said that the bulk of the imports came mainly from three refineries in India - Jamnagar, Vadinar and New Mangalore - as well as nine others in several countries, including China.
Most of the estimates made by CREA and Global Witness were based on an analysis of oil shipment data from the analytical company Kpler, while the price data were based on Eurostat and some other data sources. Both CREA and Global Witness stated that these two research articles are based on assumptions and recognize that analyzing such trade has problems and limitations.
The use of this loophole by the Russians is also evidenced by the International Energy Agency's reports. The agency's data show that Russian oil imports to India increased after the war in Ukraine. In response to the sanctions, Russia lowered oil prices to attract new buyers.
After the invasion, imports of Indian jet fuel and diesel to the UK also increased.
For reference
Russia is the world's third-largest oil producer. Russia extracts crude oil from the ground, which is then exported to refineries and converted into products such as gasoline, diesel fuel, jet fuel, and various plastics.
The Russian economy is heavily dependent on these exports.
Western allies have slapped numerous sanctions on Russia, including an oil price cap that aims to prevent Moscow from receiving more than $60 per barrel of crude oil.
But there are doubts as to whether these measures are as tough as hoped after the International Monetary Fund recently improved its forecast for Russia's economic growth in 2024 from 1.1% to 2.6%.
Impact of sanctions
The sanctions affected not only Russia but also the countries that imposed them. As oil and gas prices soared, EU countries began to compete for new supplies from Russia.
In January last year, trade statistics showed that the UK imported no fossil fuels from the country, while in 2021, imports of gas, oil and coal from Russia to the UK totaled £4.5 billion.
Last year, some US lawmakers also pushed for a ban on fuel imports from refineries that use Russian crude oil, and US Representatives Lloyd Doggett and Joe Wilson introduced a bill to close the loophole in oil refining.
