Russia’s invasion of Ukraine nearly two years ago has reshaped global energy markets, upending oil and gas deliveries to the European Union and prompting the emergence of unexpected new buyers of Russian crude.
Twenty-one months on, here are some of the biggest impacts on commodities markets.
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India has emerged as the biggest buyer of seaborne Russian crude
India has emerged as the biggest buyer of seaborne Russian crude exports in the nearly two years since the start of its war in Ukraine, seizing on Russia’s deeply discounted prices offered as a result of Western sanctions.
Russian exports to India have tripled in the first eight months of 2023 compared to the same period last year, and its crude exports accounted for nearly half of Indian supplies in the first six months of 2023, according to trading data reported by Reuters.
But Indian refiners are also taking advantage of the deeply discounted Urals prices, snatching up more supplies to refine and sell to countries in the European Union for a profit — despite attempts by some in the EU to crack down on the practice. It remains to be seen whether leaders will take further action on this in 2024.
Russian oil is selling well above the G7-capped price
The G7 nations have undertaken a novel effort to limit Russian crude from being sold above prices of $60 per barrel, and $80 per barrel for refined fuels such as diesel.
But Russia has been selling its Urals crude at prices well above that since mid-July — primarily to Indian refiners, as well as some buyers from China.
As of late September, India was paying Russia $80 per barrel for crude supplies. Draft Russian budget documents have also shown that the country expects its sovereign wealth fund to increase by 40% over the next three years, exceeding pre-war levels by 2026 on the back of higher oil and gas revenues.
Treasury Department tightens price cap enforcement
The Treasury Department has taken a number of steps aimed at going after violators of the Russian oil price cap, including publishing a new compliance regime and slapping sanctions on entities that continue to ship oil above the capped price.
Most recently, Treasury Department officials and other members of the Russian oil price cap coalition said they will soon require all Western maritime service providers to provide attestations from their counterparts that the Russian oil being shipped is indeed being sold under the capped price.
EU LNG dependence has deepened — including from Russia
The European Union has raced to increase its purchases of liquefied natural gas, including from Russia — conflicting with its goal to reduce reliance on Russian fossil fuels and cut off funding for the Kremlin’s war machine.
In the first six months of the year, the bloc’s imports of Russian LNG jumped by 40%, according to a report from the nonprofit group Global Witness.
The European Union’s dependence on LNG has deepened significantly as it looks to replace lost Russian fossil fuels, but analysts noted that this type of import breaks with the bloc’s stated goal of weaning itself off all Russian fossil fuel imports, including Russian LNG, which it plans to do by 2027.
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European Union member countries did include additional enforcement measures on Russian imports and efforts to tighten the Russian oil price cap in their 12th sanctions package this month.
The package includes new trade control measures aimed at tightening price cap enforcement and efforts to crack down on third-country shipments, amid complaints that refiners, primarily in India, were refining and selling crude oil back to the EU at a profit.
