LONDON, Feb 8 (Reuters) – Western sanctions on Russia have drastically reduced state oil revenues and diverted tens of billions of dollars to shipping and refining companies, some of which have links to Russia.
Most of the sanctions winners are based in China, India, Greece and the United Arab Emirates, at least 20 business and banking sources said. A handful are partly owned by Russian companies.
None of the companies are violating the sanctions, the sources told Reuters, but they have benefited from measures designed by the European Union and the United States to reduce revenue from what they call the Russian president’s war machine. Vladimir Poutine.
As the Ukrainian conflict enters a second year, calculations show that Russia’s revenues have fallen but export volumes have remained relatively stable despite sanctions.
Putin told the West that the sanctions would trigger higher energy prices. Instead, international benchmark Brent oil prices fell to $80 a barrel from a record high of $139 in March 2022, weeks after the war began.
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Prior to the start of Moscow’s invasion of Ukraine on February 24 last year, Brent crude was trading between $65 and $85 a barrel.
After the Group of Seven (G7) industrialized nations imposed a cap on Russian oil prices in December, Moscow’s oil export earnings fell 40% year-on-year in January, the Russian ministry said. finances.
“The official low oil price means that the Russian state budget has suffered in recent weeks,” said Sergey Vakulenko, nonresident scholar at the Carnegie Endowment for International Peace.
Vakulenko was a former head of strategy at Russian energy giant Gazprom Neft. He left the company and Russia a few days after the start of the war.
“Judging from customs statistics, part of the profits have been captured by refiners in India and China, but the main beneficiaries must be oil transporters, intermediaries and Russian oil companies,” he said. added.
Sanctions against Russia – probably the toughest imposed on an individual state – include outright bans on US and EU purchases of Russian energy, as well as bans on shipping Russian crude anywhere in the world unless it is sold at or below $60 a barrel.
Russia has diverted most raw and refined products to Asia by offering deep discounts to buyers in China and India over competing qualities from the Middle East, for example.
The shipping ban and price caps have made buyers wary and forced Russia to pay for the transportation of crude because it does not have enough tankers to transport all of its exports.
In late January, Russian oil companies were offering discounts of $15 to $20 a barrel of crude to buyers in India and China, according to at least 10 of the traders involved in the deals and a bill seen by Reuters. All sources asked not to be named due to the sensitivity of the issue.
In addition, Russian sellers also paid shipping companies $15 to $20 a barrel to ship crude from Russia to China or India, according to the 10 traders and the bill.
As a result, Russian companies received just $49.48 a barrel of Urals at Russian ports in January, down 42% year-on-year and just 60% off the European benchmark Brent price, according to the Russian Ministry of Finance.
By comparison, a US exporter of Mars crude – a similar grade to Urals – would pay around $5-7 a barrel to ship a cargo to India. Given a $1.6 per barrel discount to the US benchmark WTI, a US exporter would earn around $66 per barrel at a US port, or 90% of the benchmark price.
With production of 10.7 million barrels per day (bpd) in 2022 and exports of crude and refined products of 7.0 million bpd, the discount and additional costs would drop producer revenues by tens of billions of dollars. dollars in 2023.
The head of the International Energy Agency (IEA), Fatih Birol, said on Sunday that the price cap had cut Moscow’s revenue by $8 billion in January alone.
However, since some revenue losses are captured by Russian companies, the exact impact on producer and state revenues is difficult to quantify.
As an added complication, some Russian oil grades, including Pacific-grade ESPO, are also worth more than Urals.
Russia’s energy and finance ministries declined to comment on the impact.
EXPEDITION BONANZA ‘CRAZY GOOD’
Falling revenues have coincided with higher profits for some intermediaries, according to experts like Vakulenko and Russian oil traders.
After decades of low profits or losses, parts of the global shipping industry are enjoying a financial boom thanks to the transport of Russian oil.
These companies include Russian state carrier Sovcomflot, run by Putin ally Sergei Frank, and Greek shipping companies TMS Tankers Management, Stealth Maritime, Kyklades Maritime, Dynacom, Delta Tankers, NGM Energy and New Shipping.
Some Greek and Norwegian tanker owners have sold their old vessels at record prices to shipping companies such as Fractal Shipping, whose owners are in Dubai.
Saudi Arabia and the United Arab Emirates have refused to condemn Russia’s war in Ukraine and have expanded cooperation with Moscow despite pressure from Washington.
All shipping companies declined to comment on the profits they derive from Russian oil.
The invoice seen by Reuters showed a shipper billed a seller of Russian crude nearly $10.5 million for a trip to carry a full-size Aframax tanker with 700,000 barrels on board from a Baltic port at an Indian refinery in January.
A year ago, a similar trip would have cost a Russian oil seller between $0.5 million and $1.0 million, depending on shipping rates.
For the shipper, the cost of running such a trip in today’s market ranges between $0.5 and $1.0 million, which means that the shipper’s net profit on a single trip could be 10 millions of dollars.
A Russian crude trader described the tanker trade as “crazy good”.
While tanker owners are charging record rates for shipments of Russian crude, refiners in India and China have also received deep discounts.
India’s Russian oil imports have hit a record high of over 1.25 million bpd in recent weeks, meaning the country has saved over $500 million a month on its oil bill, oil Russian being sold at a discount of around $15 a barrel.
Major Indian importers – IOC, HPCL, BPCL, Nayara and Reliance – declined to comment on discounts and profits.
Nayara is 49% owned by Russian oil major Rosneft, led by Putin ally Igor Sechin, meaning some of the profits are indirectly captured by Russia. Rosneft declined to comment on his role in Nayara and how he might recoup some profits.
China imported more than 1.8 million bpd of Russian oil between April 2022 and January 2023, said Emma Li, China analyst at Vortexa Analytics.
Based on an estimated $10 a barrel discount for ESPO and Urals crude on delivery, this saved Chinese refiners around $5.5 billion over the 10-month period. , according to Reuters calculations.
Independent refiners in the eastern province of Shandong have been the main beneficiaries. State-owned refining giant Sinopec Corp also benefited from cheaper oil, and state-owned Petrochina, Zhenhua Oil and CNOOC profited from trading in barrels, traders said.
Not all companies, as well as the Shandong provincial government, responded to request for comment.
Additional reporting by Arathy Somasekhar and Muya Xu; Written by Dmitry Zhdannikov; Editing by Mike Collett-White and Barbara Lewis
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