India and China still buy Russian oil, but they demand huge discounts
- Two-thirds (33%) of Russia’s crude oil exports are now from India and China.
- They are major Russian customers and demand huge discounts from Russia. This is hitting the Kremlin’s war chest.
- According to Bloomberg’s estimates, Russia loses about $4 billion each month in its energy revenues.
Russian energy revenues may finally be feeling the pinch — the European Union’s sweeping sanctions against the country’s energy exports are about to kick in on December 5, more than nine months into the Ukraine invasion.
Kremlin will lose its biggest customer. Therefore, it is redirecting its seaborne exports to Asia.
However, this is becoming a difficult business. China and India now account for around two-thirds Russian seaborne crude-oil exports. As major customers, they demand huge discounts for their purchase, Julian Lee, Bloomberg’s oil strategist wrote Sunday.
Bloomberg’s analysis of data from European trade news service Argus (European Intercontinental Exchange) revealed that Russia’s Urals crude oil was trading at a $33.28 discount, or approximately 40%, to international Brent crude oil. This is a significant drop from the $2.85 discount Urals was trading at back in 2021.
Bloomberg calculates that Russia is losing approximately $4 billion in monthly energy revenues due to the Urals’ increasing discount.
This is important, considering that oil prices have fallen sharply in the last months due to concerns about a recession, high Russian output and falling demand. Prices reached multi-year highs in 2022, but this is a significant change.
Washington appears to not be worried about India’s massive purchase of Russian crude oil.
Russian oil “is going be selling at bargain price and we’re happy that India, Africa, or China get that bargain.” It’s fine,” Janet Yellen (US Treasury Secretary) told Reuters on November 11.
Brent crude oil futures have risen 4.3% this year to $81.30 per barrel, after rising over 30% in the days following the Ukraine war.