Madrid, Brussels, Zurich The statistics read like a victory message: The imports of Russian crude oil and refinery products such as diesel and kerosene have collapsed by 90 percent, according to the European statistics agency Eurostat.
The embargo on sea freight imports of Russian refinery products, in place since February, seems to have been a complete success.
But discussions with industry insiders and analysts suggest that the Eurostat figures do not tell the whole truth. Diesel, which was probably made from Russian crude oil, continues to come to Europe via third countries that are not participating in the embargo.
In addition, suspicious trade flows suggest that countries like Morocco simply continue to export diesel from Russia to the EU.
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The think tank Center for Research on Energy and Clean Air (Crea) recently found in a study: Western countries that have imposed sanctions on Russian oil have massively increased their imports from precisely those countries that are the new main recipients of Russian oil became.
According to European rules, this is not a breach of sanctions either: the country of origin for oil products is the country in which the oil was refined. The origin of the crude oil is irrelevant.
After China, India, Turkey, the United Arab Emirates and Singapore, Crea is among the most important customers for Russian oil. Overall, their deliveries of oil products to Western sanctioned countries increased by 26 percent to almost 19 billion euros within a year after the start of the Ukraine war.
After the embargo on Russian oil: remarkably low prices for imported diesel
Crea energy analyst Isaac Levi told the Handelsblatt: “The sanctions worked to some extent.” They would have reduced Putin’s income because they banned the sale of diesel and crude oil to Western countries and thus limited the number of customers. As a result, the price that Russia receives for its oil has fallen.
“However, these sanctions have loopholes because Russian oil is imported to third countries, which then refine it and sell it to the countries imposing sanctions,” the expert said.
They cannot currently produce diesel at the prices at which it is imported. An insider from the oil industry
What makes the situation even worse for the European oil industry: the diesel produced from Russian crude oil is in many cases cheaper than products from domestic refineries. An oil industry insider says, “You can’t currently produce diesel at the prices it’s imported at.”
This can only be explained by the fact that cheap Russian oil serves as the basis for many diesel imports: “That’s strange when you consider that, unlike the processing of crude oil within the EU, imports also involve transport costs.”
The boss of the Spanish energy company Repsol, Josu Jon Imaz, had already spoken publicly in April. He called on the EU to ban imports of Russian diesel via third countries. “Diesel from Russia is still on the European and Spanish markets,” says Imaz. “We call on the EU authorities to prevent imports via intermediaries.”
According to Borell, the member states must now take action.
(Photo: dpa)
The EU Commission watched the practices for a long time. It was not until June 21 that it passed an eleventh package of sanctions, which, among other things, provides for restrictions on selected exports to certain third countries due to suspected circumvention of sanctions. The regulation targets high-tech products such as aircraft parts, which still find their way to Russia. Suspicious imports could also be restricted according to the same principle. However, these are not yet included in the eleventh package of sanctions.
Instead, the EU’s foreign policy representative, Josep Borrell, recently pointed out that it was not the EU but its members that had to take action. “If diesel or petrol comes into Europe from India and is made with Russian oil, it is certainly circumventing sanctions and member states must take action,” Borrell told the Financial Times.
Questionable trade flows in oil from Russia
The Russian trading partners use the gaps in the sanctions regime in very different ways. In addition, they are not limited to importing Russian crude oil for further processing.
According to media reports, countries such as Saudi Arabia and the United Arab Emirates are also increasingly importing diesel from Russia and, in return, exporting more of their own refined products.
The trade flows with Morocco are particularly striking: the North African state did not export any diesel before the war and also no longer has any refineries.
Since last December, however, the country has been exporting diesel – the largest customer is Spain. At the same time, diesel imports from Russia have increased significantly in Morocco since September 2022.
The loopholes need to be plugged. Only then will the sanctions take full effect. Isaac Levi, Crea Energy Analyst
The amounts in Morocco are comparatively small. The trend can also be found in other countries. Turkey, for example, has also significantly increased its imports of Russian diesel and its diesel exports. The third largest customer is an EU member: the Netherlands.
Crea expert Levi says: “These loopholes need to be closed. Only then will the sanctions take full effect.” In order to hit the Russian war chest, trading in diesel is particularly important.
Russia has production costs of $20 per barrel of diesel. However, the price cap is $100 per barrel. This creates scope for hefty profits – for Russia, but also for intermediaries such as Turkey or Morocco.
Levi’s conclusion: The core problem is “that the price cap for Russian oil products is set so high and that it has not been checked so far”.
Observers have one main explanation for the passivity of the Europeans: as a fuel for the transport sector, diesel plays an important role in the economy. A diesel shortage or soaring prices in Europe could set back the continent’s efforts to fight inflation.
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