India and China Still Buy Russian Oil, But They Demand Big Discounts

• China and India now account for nearly two-thirds each of the seaborne Russia crude oil exports.
• They are Russia’s largest customers and demand massive discounts, which will hit the Kremlin’s war chest.
• According to Bloomberg estimates, Russia loses about $4 billion per month in its energy revenues.

Russian energy revenues may finally be feeling the pinch — the European Union’s sweeping sanctions against the country’s energy exports are about to kick in on December 5, more than nine months into the Ukraine invasion.

The Kremlin is losing its largest customer and is reorienting seaborne exports to Asia, especially to India, China. 

This is becoming a very difficult business. China and India now account roughly for two-thirds of all Russian crude-oil exports seaborne. They are also major customers and demand huge discounts for their purchases Bloomberg’s oil strategist Julian LeeSunday, wrote.

According to Bloomberg’s analysis, which used data from the Intercontinental Exchange in Europe and trade news service Argus, Russia’s flagship Urals crude was trading at a discount $33.28, or around 40%, to the Brent crude oil at end of last week. This is a sharp drop from the $2.85 discount Urals was trading at in 2021.

According to Bloomberg’s calculations, Russia is losing approximately $4 billion per month in energy revenues due to the increasing discount of the Urals.

This is significant, especially considering the recent rise in oil prices. fallen sharplyFears of a recession have prompted strong Russian output and falling demand in recent months. Prices reached multi-year highs in 2022, but this was after the Russian economy suffered a severe downturn.

That is also why Washington doesn’t appear to be too worried about India and China’s huge purchase of Russian oil, even if they pay prices above a G7 imposed price cap.

Russian oil will “be selling at bargain prices” and we are happy to see India or Africa get that bargain. It’s fine,” US Treasury Secretary Janet YellenTelled ReutersNovember 11,

BrentCrude futures are up 4.3% this year at $81.30 per barrel, after rising more than 30% in the days following the Ukraine war.