U.S. President Donald Trump is actively urging China and India to cease purchasing oil from Russia in order to cut funding for the Kremlin's war against Ukraine. His call for action comes as he attempts to pressure Russian President Vladimir Putin into agreeing to a ceasefire amidst the ongoing conflict.
Despite Trump's efforts, both China and India have shown little willingness to stop importing Russian oil due to the financial incentives it offers. The cheapness of Russian oil is highly attractive to these countries, benefiting refiners as it helps meet their energy needs while keeping costs down.
Historically, China, India, and Turkey have emerged as the largest buyers of Russian oil, especially following the European Union's decision to boycott most Russian seaborne oil beginning in January 2023. This boycott led to a significant restructuring of crude oil flows, diverting supplies from Europe to Asia. Since the EU's actions, China has become the primary purchaser of Russian energy, securing approximately $219.5 billion worth of oil, gas, and coal. India follows with about $133.4 billion, while Turkey has imported oil totaling around $90.3 billion, marking a notable increase since the beginning of the conflict.
Interestingly, Hungary continues to import Russian oil through a pipeline, despite being an EU member. This is largely attributed to the stance of Hungarian President Viktor Orban, who has publicly criticized sanctions against Russia.
The primary allure of Russian oil for these countries is its lower price compared to international benchmarks such as Brent crude, enabling refineries to increase their profit margins by converting crude oil into various usable products, including diesel fuel. As a result, Russian oil exports remain lucrative, with the Kyiv School of Economics reporting that Russia earned $12.6 billion from oil sales in June. Despite sanctions imposed by the Group of Seven (G7) nations aimed at limiting Russia's oil revenue through an oil price cap, Russia has managed to avoid significant financial loss by utilizing a "shadow fleet" of older vessels, supported by insurance and trading companies based in nations not enforcing sanctions.
According to predictions from the Kyiv institute, Russian oil exporters are expected to generate approximately $153 billion in revenue for the year. Fossil fuels continue to represent the largest source of revenue for the Russian budget, sustaining the ruble currency and enabling Russia to procure various goods, including weapons and components necessary for military operations.
