While India Inadvertently ‘Laundered’ Russian Crude Oil, Was The West Actually A Willing Buyer?

How many of us truly know the source of the energy we are using every day? How many of us ensure that the energy we use is ethically sourced, or are we simply relying on energy providers and the government to do that for us? How many of us vehemently oppose the war in Ukraine and the actions of Russia, but don’t take the time to ensure the fuel in our cars, the energy in our homes and the power at our workplace isn’t being inadvertently supplied by Russia? Would it surprise you to learn that analysis by Global Witness has revealed that in the first six months of 2023, an estimated 1 in 20 UK flights ran on Russian oil. Would it also surprise you that in that six-month period, the UK purchased 6.2 million barrels of fuel containing Russian oil, that had been ‘laundered’ by foreign refineries and which contributed at least ￡40 million in tax to the Kremlin! To try and put that figure into some context, consider this: Russia is currently using drones from a variety of sources to attack urban areas throughout Ukraine, killing and injuring scores of civilians. Russia pays on average ￡12,000 - ￡15,000 for a single drone. If in the first six months of 2023, the UK purchased 6.2 million barrels of fuel that had been ‘laundered’ with Russian oil, then it is likely Russia would have received approximately ￡40 million in tax from those sales. That ￡40 million would have bought over 2,500-3,500 drones. Is it time to start to question exactly where our energy is being sourced and to what extent our government may be complicit in the purchase of ‘laundered’ fuels?

In February 2022, when the European Union (EU) and G7 nations implemented sanctions against Russia by capping the price on the sale of Russian crude oil, the message was clear – The West was committed to disrupting the Russian energy market and restricting the flow of funds from the industry into the Kremlin’s war chest. By disrupting the export and sale of Russia’s most valuable commodity, the West would surely be able to weaken Russia’s economic and financial ability to continue its war in Ukraine. The West’s dependency on Russian oil and gas was at an all-time high and was laid bare when the conflict in Ukraine started. In 2021 alone, the EU imported $108 billion worth of Russian energy. Russia was the fifth largest trading partner to the EU and its third largest importer. Over the preceding decade, the EU had become dependent on cheap Russian oil and gas. Sanctions removing the availability of that commodity would come at a high price.

As the effects from the sanctions began to take hold and the West appeared unified in its intention to reduce its reliance on Russian energy in record time, the problem arose of where exactly the West was going to source its oil and gas. It is widely acknowledged that Europe still depends on Russian oil and gas and that it may take until the end of the decade to break that dependency completely. At the start of the conflict in Ukraine, attempts were made to persuade oil rich nations such as Saudi Arabia, the United Arab Emirates and Venezuela to increase their own oil and gas production, but these had limited success. Europe is fully aware that finding new suppliers for oil and gas is a short-term objective. Europe has to find ways of reducing current energy consumption and improve energy efficiency through the development of new and sustainable energy efficiency. In the meantime, industry must function, homes must be powered and cars must be fuelled. With the best intentions in the world, Europe and the West had to plan to survive without Russian oil and gas, whilst also ensuring it was committed to disrupting the funds flowing into the Kremlin’s war chest and funding the war in Ukraine.

While the EU & G7 appeared united in breaking their dependency on Russian oil and gas, Russia made new allies and soon found new customers for its energy products. Most prominently China, India and Türkiye increased their trade with Russia over the supplies of oil and gas, despite the implementations of sanctions against Russian export of crude oil. These countries refused to support the EU & G7 sanctions imposed against Russia. Most notable of these countries was India, who had repeatedly abstained at the United Nations on resolutions against the Russian invasion of Ukraine, in an attempt to remain neutral over the conflict. Only two months after the invasion of Ukraine in February 2022, India began importing huge amounts of Russian crude oil at low cost. In the last year alone, India imported a daily average of one million barrels of Russian crude oil a day. In a 12 month period, India became the world’s second largest buyer of Russian crude oil. As a result of this boost in trade to India, Russia soon became India’s largest oil supplier. While the West looked on disapprovingly at India, the country’s Prime Minister, Narendra Modi, rebuffed criticism of his country’s trade deals with Russia, with his ‘India first’ policy. Prime Minister Modi described this policy as:

"India first is the central point (of our foreign policy). It is about protecting India's strategic interest; it is to ensure that India marches forward in achieving economic prosperity by leaps and bounds, and reaches the position which it is destined to reach."

Quite simply, India saw itself as morally obliged, and in the best interests of its poor citizens, to not only continue buying Russian oil, but to boost the levels it bought, significantly. In these circumstances, Prime Minister Modi said that purchasing cheap Russian energy would bring energy costs down for the average Indian citizen. It is therefore surprising to hear that petrol and diesel costs in the country never dropped and remained high for consumers. It appeared that despite Prime Minister Modi’s ‘India first’ policy, the citizens of India were not benefitting from cheap Russian oil. If they weren’t, then who was?

In a nutshell, India and its wealthy refinery owners have benefited from cheap Russian oil. Over the past year there has been increasing evidence that India has been buying cheap Russian oil, refining it and then selling it on to Europe. Refined petroleum is currently India’s top export, current reports suggest that the export of refined products from India to the EU has increased over 500% since the conflict in Ukraine started. That’s a staggering figure! In 2022, India exported 1.1 million barrels of refined products to the EU, but in 2023 that figure rose to 7.4 million. Is it simply coincidence that this huge rise coincides with Russia being India’s largest oil supplier?

There are two companies in India who between them, have acquired almost half of all Russian oil that has been imported into the country since the invasion of Ukraine. These companies are Reliance Industries and Nayara Energy. These two companies run two of the largest refinery complexes in the world. Along with others, these refineries have been buying cheap Russian oil, processing and refining it, and then selling the processed products on to European countries. There is nothing illegal about this, India is simply circumventing the EU sanctions on the purchase of Russian crude oil. India does not just buy crude oil from Russia; it buys it from multiple countries resulting in identifying the exact origin of a processed product particularly challenging. However, with the amounts of crude oil India has been buying from Russia and its enormous increase in exported products, it is clear that cheap Russian crude is the backbone of India’s refined exports. We should remember though, if India is selling a product, it is because someone is buying it. India made it clear that it did not support the EU & G7 sanctions against Russia’s energy industry; it made it clear that its foreign policy of ‘India first’ was the country’s overriding priority with cheaper energy for Indian citizens. India’s decision was not to implement sanctions against Russia over the conflict in Ukraine, its position was clear. The issue here is not with who is selling the product, it is with who is buying it.

On 5 December 2022, the UK Government announced a ban on the import of Russian oil in 2023, in order to disrupt the flow of funds from Russia’s energy industry into the war in Ukraine. The UK’s guidance on the ban of Russian oil and oil products dated 14 April 2023 states:

The ban prohibits:

? the import of all oil and oil products that originate in Russia

? the import of oil and oil products that are consigned from Russia

? the direct or indirect acquisition of oil and oil products that originate in Russia or are located in Russia, with the intention of bringing those goods to the UK

? the direct or indirect supply or delivery of oil or oil products from a place in Russia to the UK

The ban applies to a wide range of goods, including any oil or oil products within the HS codes below, which are produced, manufactured, extracted or processed in Russia. The ban includes crude oil, refined products, and bioethanol, bitumen and petroleum gases. However, in Section 3 of the guidance the UK Government have stated:

? If oil or oil products do not originate in Russia nor are located in Russia, they are not subject to the bans on import, acquisition, supply and delivery. Oil and oil products that originate from another country, and that are located in or consigned from a country other than Russia are therefore not subject to the prohibitions.

The guidance further states that:

? Russian oil or oil products which have been blended with non-Russian origin oil or oil products in a third country will not automatically be considered substantially processed and must demonstrate that the processing resulted in a new product (this could, for example, be evidence that the HS code for a new product differs from the original) or that the processing represents an important stage of manufacture. In both cases the processing must take place in an undertaking equipped for the purpose. All of these steps must be done for normal commercial purposes, rather than to avoid the UK’s sanctions regime.

? For example, if crude oil from the United Arab Emirates is refined in Sweden to produce diesel, these would be deemed to originate in Sweden.

In essence, the UK Government is complying with the guidance it has implemented over the ban on Russian oil and oil products. Technically, it is entirely legal for the UK to purchase refined products from India, even if they contain Russian crude oil, providing that the imported processed product has not been refined in Russia. Kpler data analysed by Global Witness has revealed that in the first six months of 2023, the UK imported 6.2 million barrels of oil products from three of India’s largest oil refineries. In that same period, those three major Indian oil refineries processed 146.8 million barrels of Russian crude oil. Those refineries do not solely process Russian crude oil, they process oil from elsewhere, but there is no doubt that Russian crude oil forms a significant portion of the refineries processed products. Is the UK Government’s purchase of these processed products from India legal? Yes it is, following its own guidelines. Is it morally and ethically acceptable? That is another question.

It would be na?ve to think that the UK Department for Business & Trade, and the Department for Energy Security & Net Zero are not aware of the current processing practices at refineries in India. It would be na?ve to think that they were not aware of the presence of Russian crude oil in the processed products they are buying from India. The question is then, why is the UK Government buying refined products from India and indirectly contributing to the Kremlin’s war chest for conflict in Ukraine? While the guidance on Russian oil products is clear, there are obvious loopholes in it that could be exploited. Surely, when the Government is writing guidance on such critical matters, on a global stage, it ensures that loopholes are identified and mitigated. Even then, when a loophole is being exploited, isn’t it the responsibility of the Government to address this as quickly as possible? If India is purchasing Russian crude oil on such an enormous scale and refining it for onward sale to Europe, is it not the responsibility of the Government to ensure that the purchase is ethically and morally acceptable? The West’s dependency on cheap Russian energy was clearly evident for those that took time to look. In July 1981, the Reagan administration received a memo from the CIA, urging America to oppose Russia’s proposal for the new Trans-Siberian pipeline from Russia to Europe; making it clear that Europe’s dependency on cheap Russian energy would weaken the West’s position with Russia. The warning signs have been there for decades. Has the lack of alternative suppliers of fossil fuels and Europe’s struggle to reduce current energy consumption and improve energy efficiency, through the development of new and sustainable energy efficiency, left our Government with no other option than to allow the loopholes in guidance to remain open? If this is the case and our dependency on these products is critical, is it the responsibility of our Government to say so? UK Government’s must always be seen to serve to the highest ethical standards; they must set the standard for others to follow. Ethical standards underpin the very workings of Government, and create a culture of trust, transparency and integrity. If the UK Government is buying products from Indian oil refineries ‘laundering’ Russian oil, do you feel it is ethical, is it business conducted with transparency and integrity? You decide…