By Shruti MenonBBC reality check
India and China are increasingly buying Russian oil at a discount as global energy prices remain high and Western countries seek to reduce their reliance on Russian energy.
Faced with criticism from Western nations for its purchases of Russian oil, Indian Foreign Minister S Jaishankar said his country had little choice “when the price of oil breaks our backs”.
Where is Russian oil going?
India and China now account for more than half of all Russian maritime oil exports.
Russia is now China’s biggest oil supplier, succeeding Saudi Arabia in 2022.
In March this year, China and India’s combined oil imports from Russia surpassed those of the 27 EU member states.
India’s purchases of Russian oil have fluctuated this year, declining in February at the start of the Russian invasion of Ukraine, but then increasing significantly in the following months.
Chinese imports of Russian oil exploded from a very low base at the start of this year to peak in June and July and largely maintain those levels until September.
Myanmar’s military regime recently said it would also start importing from Russia.
Sri Lanka, in the grip of a severe economic crisis, benefits from Russian oil at a reduced price with three shipments.
In contrast, Japan has made it clear that it will phase out imports of Russian oil, and South Korean imports of Russian crude have fallen.
Cheaper oil boosts inflow to Asia
Following its invasion of Ukraine, Russia had fewer buyers for its Urals crude oil as some foreign governments and companies decided to avoid its energy exports, and its price began to decline.
At one point, Russian Urals crude was more than $30 a barrel cheaper than Brent crude (the global benchmark). At the end of September, it was around $20 a barrel cheaper.
The Indian government has defended its purchases from Russia, saying it must source oil from where it is cheapest.
The US government has criticized these purchases, but has little influence on Asian governments’ decisions about where they buy their oil.
A plan proposed by the G7 group of nations (UK, US, Canada, France, Germany, Italy and Japan) to cap the price of oil purchased from Russia to limit Russia’s revenue seems largely symbolic .
Russian oil is already significantly cheaper than oil from other sources, and Moscow has said it will stop selling to countries that try to impose price caps.
What is the impact of the sanctions on the oil trade?
Although the price of Russian crude oil is attractive, Indian refineries face a challenge in funding these purchases as sanctions against Russian banks affect payment transactions.
One of the options India is considering is a local currency system, in which Indian exporters to Russia are paid in rubles instead of dollars or euros and imports are paid in rupees.
Chinese state-owned oil companies are increasingly using the Chinese renminbi rather than the US dollar to fund their overseas oil purchases.
Nearly 50% of India’s total gas needs come from abroad – mostly from the Gulf States, and very little from Russia.
“Deliveries of Russian LNG (liquefied natural gas) to India are rare,” says Antonio Peciccia, commodity industry expert at Argus media. “We estimate five shipments so far this year, compared to seven a year earlier.”
China imports most of its gas by pipeline from Central Asia. Currently, Turkmenistan is the largest supplier.
Once a new gas pipeline, known as the Power of Siberia, is completed later in the decade, Russia could well take over as China’s biggest gas supplier.
China is also increasing its capacity to import LNG from Russia and has signed new agreements with Russian companies to transport LNG via the Arctic.
Looking at customs data for August, Russian LNG was actually the most expensive China took last month,” Peciccia says.
That’s likely, he says, because China bought LNG in the short-term market, which is currently more expensive than long-term contracts.
In September, Russia’s Gazprom and China National Petroleum Corporation agreed to use Russian rubles and yuan instead of dollars to make payments for Russian gas.
With additional reporting by Wanyuan Song