So, while until a year ago, Russian crude and fuels were going mostly to Europe directly, now almost all crude oil that Russia exports ends up in China and India. From there, processed into fuels, it goes to Europe. The routes have shifted. Oil demand has not.
The authors noted that total budget revenues were down in April on an annual basis, but added that “Russia was able to export its main crude oil variety, for the first time, at prices that were systematically above the price cap level set by the U.S., EU and allies.” What the optimistic spin omits is that Russian oil prices remain tied to global prices, and as global prices recover, so do the prices of Russian crude, as stated by the Centre for Research on Energy and Clean Air. In other words, global oil demand, and Asian oil demand specifically, is so inelastic that no amount of sanctions can sap it. recently that close to a third of China’s and India’s total oil imports came from three countries: Russia, Iran, and Venezuela.
According to the U.S. Treasury Secretary, the sanctions and the price cap are working as intended, reducing Russia’s oil revenues while keeping the international market for oil well supplied. Indeed, from that perspective, they are working as intended. Yet the shift these sanctions have prompted in global oil trade routes is much more important.