It’s been nearly four months since the EU’s oil embargo on Russian crude oil took force, but as Politico’s recent report shows, Russian exports stayed the same, prompting experts to think that Moscow is still delivering to the European market by circumventing the rules.
“Since the introduction of sanctions, the volumes of crude oil Russia is exporting have remained more or less steady,” said Saad Rahim, chief economist at the global trading firm Trafigura. “It’s possible that Russian oil is still being sold on to the EU and Western nations via middlemen.”
Of course, going through the back door has its associated costs. Due to the sanctions, Russia does have to deal with significantly increased transportation costs, giving a sizable portion of its energy income to its intermediaries, but at least it can stay in the game.
There is a wide array of practices Moscow can use to smuggle its goods into Europe. As we wrote before, one trick is to transfer its oil tankers to companies registered in third countries, or simply change flags on them, to effectively circumvent the sanctions aimed at preventing seaborne shipments from reaching the EU.
Another problem is that crude oil is extremely hard to track on the highly intertwined global markets. After being mixed or blended with other shipments by complicit companies in transit countries, virtually no one can determine the origin of each batch. Additionally, even if it’s not mixed, refining it will also hide any characteristics of oil that point to the country of production.
One of the back doors servicing Russia is suspected to be Azerbaijan. Data shows that in mid-2022, (after most EU member states already cut ties with Russian oil voluntarily), Azerbaijan exported 240 thousand barrels a day more than it had produced—more than a third more than it could have on its own, not to mention that the Azeri production capabilities have been in decline for a long time.
“How can a country diminish its production and increase its exports at the same time? There is something completely inconsistent in the figures and this inconsistency creates suspicions that sanctions are being circumvented,” François Bellamy, one of the EPP’s French MEPs told the Commission, calling for an official investigation into the matter.
Turkey is emerging as another suspect in laundering Russian crude oil. The Finnish Centre for Research on Energy and Clean Air (CREA) claimed a few months ago that Turkey—which doubled its imports of Russian oil last year—is refining crude oil into products that are not subject to sanctions to sell into Europe, generating excess revenue not only for itself but also for Russia.
This practice is “completely legal, but completely immoral,” Oleg Ustenko, Kyiv’s presidential advisor on economic matters commented. “Just because it’s allowed doesn’t mean we don’t need to do anything about it.”
A more recent report, released by British NGO Global Witness on Monday, March 20th, found that Russian oil is being sold all over the world at prices far exceeding the $60 cap imposed by the G7 at the end of last year. As Mai Rosner, a GW representative said, “the fact Russian oil continues to flow round the world is a feature, not a bug, of Western sanctions.”
