Motorists may be inadvertently helping finance Vladimir Putin’s invasion of Ukraine, according to a report that claims Australia is indirectly importing Russian oil supplies.
- A report has found that Australia is importing Russian oil indirectly through refineries in India.
- India’s imports of Russian crude have increased since Moscow’s invasion of Ukraine
- Rising oil and gas prices have generated windfall gains for the Kremlin since February.
The Center for Research on Energy and Clean Air (CREA), a Finland-based advocacy group, says nations like Australia and the US, despite bans, continue to receive Russian oil through refineries on the subcontinent. .
India’s imports of Russian crude have soared since Moscow launched its invasion of Ukraine in February, and CREA said many of those barrels were re-exported as refined products to countries such as Australia.
The report comes amid rising tensions over energy supplies in Europe after Russia all but cut off gas supplies ahead of the northern winter, sending record prices higher still.
Australian dollars ‘flow to Russia’
Lauri Myllyvirta, lead analyst at CREA and co-author of the report, said there was too little oversight to ensure Russian oil did not enter Australia.
Myllyvirta says that, albeit indirectly, Australia may be helping to prop up the Kremlin while funding what it claims are Russian war crimes against neighboring Ukraine.
“Our analysis shows that Australia is receiving oil shipments from Indian refiners that are importing large volumes of Russian crude,” Myllyvirta said.
“This means that Russian oil could be reaching the Australian market and, by extension, Australian dollars could be financing Russia’s invasion of Ukraine.
“Tighter monitoring of oil shipments is needed to prevent Russia from circumventing oil import bans, and Australia must be vigilant about where its fossil fuels come from to avoid being complicit in Russia’s war crimes.”
According to the center, spending by Indian refiners on Russian oil rose from negligible levels before the invasion to around €7 billion, or more than $10 billion, after the war broke out.
Since May, the group says, India has been importing oil worth about 40 million euros ($58 million) a day.
The report states that Russia’s windfall profits from high fossil fuel prices amounted to €158 billion ($230 billion) between February and August, more than offsetting the cost of the Ukraine invasion, which estimated at 100 billion euros ($146 billion).
Although India’s purchases of Russian crude rose sharply, the report found that the European bloc remained the biggest buyer, shelling out $85 billion. Euros ($124 billion) in fossil fuels during the period, followed by China with 35 billion euros ($51 billion) and Turkey a €11 billion ($16 billion).
‘Disappointing’ but difficult to tackle
Geopolitical analyst James Bowen said it was entirely plausible that Australia could be inadvertently bringing in Russian oil given the opaque and complex nature of the international oil trade.
Bowen, policy fellow at the Perth USAsia Centre, said such a revelation was unlikely to go over well with most Australian motorists, who he believed were strongly against Russia’s actions.
However, he also noted that other countries that had bans on imports of Russian oil would likely be in the same boat because it was so difficult to “follow every molecule.”
“Any Australian probably wouldn’t want to offer material support to Russia,” Bowen said.
“And fossil fuels – oil, coal, gas – are massive sources of Russian income.
“So I think the Australians would be disappointed with that.
“But at the same time … by participating in those international markets and because the price of oil has skyrocketed because of Russia’s war in Ukraine, we are indirectly supporting Russia’s efforts anyway.”
Bowen says Russia’s belligerence may be generating short-term financial gains for the Kremlin, but the war in Ukraine is likely to cost the country dearly in the long run.
He said this was because many of Russia’s most important markets for its fossil fuel experts, such as the European Union, would partially or fully reduce their reliance on those supplies.
Energy ‘potent’ political weapon
Despite this, Bowen acknowledged that Europe’s dependence on Russian oil and gas gave Putin great influence over the continent in the meantime.
“After the end of the Soviet Empire, Vladimir Putin, once he came to power, deliberately sought to position Russia as this energy superpower,” he said.
“Obviously they have the wealth of resources, but also, and Putin in particular, they realized that because of how heavily dependent countries are on energy, it can be a really powerful political weapon.”
Mark McKenzie, the head of the Australian Oil and Convenience Traders Association, agreed that it was possible that Russian oil was entering Australia.
But Mr McKenzie, whose organization represents some refined fuel importers along with wholesalers and retailers, says the industry is working hard to keep Russian supplies out.
He said it was his understanding that all importers had redrafted contracts since the invasion to prevent secondary importation of Russian oil or other fuel products.
“Because India is acquiring Russian oil, it’s possible that some of that will inadvertently flow into our economy,” McKenzie said.
“But companies are doing everything reasonably possible through trade agreements to avoid that.
“Apart from actually following the molecules, there’s pretty much nothing a company can do from here.”
Drive efficiency to reduce demand
Bowen said India is likely to continue buying large amounts of Russian oil despite pressure from Western nations led by the United States.
He explains that although India seems to be getting closer to the West through forums like the Quad, which also includes Australia, the US and Japan, the rising Asian power has its own national interests.
These were heavily linked with Russia, which was India’s largest supplier of weapons, as well as other primary products such as fossil fuels.
For Myllyvirta, Australia could help shift the long-term balance of power against Russia by reducing its use of oil, and thus the demand for crude.
“Australia also has one of the highest levels of per capita oil consumption and lacks fuel efficiency standards for vehicles,” Myllyvirta said.
“[Australia’s] oil import demand helps boost Kremlin revenue by driving up world prices and demand.”