Despite the stringent sanctions regime, the Russian Federation has overtaken Saudi Arabia to emerge as the largest oil supplier to both China and India, the two most populous countries on earth. Russia has historically had good relations with both countries, and both have refused to condemn the invasion of Ukraine.
China is the largest importer and consumer of oil in the world, while India is third. Both countries are enormously energy hungry and rely on imports to fuel that need since both lack sufficient domestic production. Both countries have also taken a steadfast stand on ignoring Western sanctions, pointing out that they have problems of their own and that the developmental needs of their populace take precedence over geopolitical scuffles.
The pivot to Asia is helping stabilize the Russian economy despite sanctions.
Chinese imports of Russian oil grew by nearly a quarter as compared to the same period last year. The energy-hungry country has been lapping up Russian oil at a big discount, to the tune of almost 2 million barrels a day. Russia is the largest supplier to China. Meanwhile, India imported nearly a million barrels a day from Russia as well.
China has extremely close ties with Russia, with both declaring a ‘friendship without limits’ and that ‘relations are at the highest point they’ve been in history’. During Chinese leader Xi Jinping’s visit to Moscow, he and Vladimir Putin signed a plethora of deals on energy, trade, and military affairs.
Despite immense pressure from the West, India, too, continues to buy Russian oil, also at a big markdown. In fact, India even expanded its imports to much consternation. In response to Western coercion, Indian foreign minister S. Jaishankar said, “Europe needs to grow out of the mindset that its problems are the world’s problems, but the world’s problems are not its problems.” The two countries have had historically close ties, with Russian equipment forming the bulk of the Indian Armed Forces.
Russia has now overtaken both Iraq and Saudi Arabia to be the largest supplier of energy to India, accounting for 22% of the market. However, China still remains the largest overall buyer of Russian oil, importing a record high of 1.94 million barrels a day.
Demand is expected to skyrocket in the second half of this year.
The expansion of supply to Asia has made up for the diminishing exports to Western markets. However, it is still estimated that Western sanctions have caused Russian exports to drop by as much as a million barrels a day. It is also estimated that the price caps imposed by the EU have drastically lowered oil revenue, though how much exactly is difficult to gauge.
The reopening of China with the removal of all COVID-19 restrictions has revived global energy demand as Chinese manufacturing revs back to full swing. OPEC has revised its forecast for Chinese oil demand upwards, and the International Energy Agency has warned of an energy deficit in the second half of this year as China drives world oil demand to record levels. It has recommended building out stocks now to ease stress in that scenario.