By Gavin Maguire
LITTLETON, Colorado- Asia and Africa have replaced Europe as the top destinations for Russian crude oil exports since Moscow was slapped with European sanctions on sales of energy products following its invasion of Ukraine in February 2022.
Prior to the sanctions in mid-2022, Europe accounted for more than 60 percent of Russia’s oil exports and provided Moscow with a lucrative income stream for oil that was supplied cheaply to major European consumption hubs by pipeline.
To make up for the lost European volumes, Russian exporters were forced to slash oil prices since 2022 to grow business in far-flung markets, and divert record volumes of crude previously transported by pipeline onto tanker vessels.
The main Russian crude oil grade, Urals, has traded at a discount of more than $20 a barrel to Dated Brent crude – Europe’s main cash oil benchmark – since mid-2022, versus an average discount of less than $2 a barrel in 2021, LSEG data shows.
That aggressive discounting in turn resulted in steep jumps in Russian oil purchases by Asia and Africa, and record high overall crude imports by both continents in 2023, ship tracking data from Kpler shows.
Continued aggressive oil pricing by Russia is likely to spur additional increases in oil buying across both Asia and Africa in coming years, despite efforts everywhere to cut reliance on fossil fuels in energy systems.
Total Russian seaborne shipments of crude oil and condensate hit new highs of 2.75 billion barrels in 2023, ship-tracking data from Kpler shows, up 4.4 percent from 2022, and came despite a drop of nearly 46 percent in shipments to Europe.
Offsetting the collapse in sales into Europe was a jump of 56 percent in shipments to Asia, which is now the top overall market for Russian oil, and an increase of 144 percent in Russian oil sales to Africa.
For both Asia and Africa, the annual increase in oil purchases from Russia in 2023 was the largest ever, helping to push total oil and condensate imports to record highs in both regions.
The higher shipments to Asia and Africa also increased the share of Russia’s non-European exports to a record 73 percent from less than 40 percent in 2019, ensuring that Moscow has started 2024 far less dependent on Western oil markets than ever before.
The chief driver of Russia’s penetration into Asian and African oil import markets was the steep price discounts offered on crude since Europe’s sanctions kicked in.
In addition to discounting Urals crude shipped out of northern Russia, exporters also cut the price of Sokol oil, shipped mainly out of the Russian far east, to record discounts of more than $13 a barrel against dated Brent crude cash prices.
Such steep price cuts compared to Europe’s main oil benchmark provoked strong buying interest from several cost-conscious buyers, notably in China and India, which together accounted for 48 percent of all Russian oil flows in 2023, Kpler data shows.
That combined share of Russian oil purchases by China and India compares to about 30 percent in 2022 and less than 15 percent in 2021.
However, while in volume terms China and India were Russia’s main customers in 2023, several nations across Africa posted far steeper annual growth in Russian oil imports.
Ghana, Libya, Tunisia and Togo all posted more than 100 percent annual growth in Russian oil imports in 2023, while Morocco, Senegal and even Nigeria – an oil producer and exporter – also showed steep jumps in Russian oil imports last year.
Some of the import volumes shattered previous records, with flows into Ghana alone topping 16 million barrels in 2023, against 600,000 barrels a year on average from 2017 through 2022, according to Kpler.