Current Accounts: The Hinrich Foundation Trade Podcast
How oil is adding fuel to global fragmentation
Published 13 August 2024
In this special edition of Current Accounts, the Hinrich Foundation’s podcast on global trade, Patrícia Vasconcellos from the US Association of Foreign Press Correspondents and Robert York, Director of Regional Affairs at the think tank Pacific Forum, delve into how shifting oil trade dynamics are fueling global fragmentation.
Tune in to this special episode hosted by the Association of Foreign Press Correspondents in the United States here:
Following Russia’s invasion of Ukraine in February 2022, the West imposed stringent sanctions on Russia to cripple its oil exports and economy. Despite these efforts, Russian oil shipments have remained resilient, mainly due to new buyers entering the market.
Russia has surpassed Saudi Arabia as the primary oil supplier to China. This shift in the global oil markets, driven by falling oil prices and Western sanctions, has significantly influenced global trade dynamics. While the European Union’s reduced dependence on Russian oil is seen as a positive outcome, the increase in oil imports by India pose a challenge, as the US is concerned about strengthening trade ties between India and Russia.
In response to Western economic pressures, Russia has strategically increased its oil exports to Africa and Asia. This move highlights the need for the US to bolster its diplomatic efforts in the Global South to counterbalance the influence of Russia and China. Furthermore, the environmental risks associated with oil transportation, particularly through poorly maintained "shadow tankers," pose substantial threats of oil spills and ecological damage.
These insights were highlighted in the Association of Foreign Press Correspondents’ interview with Robert York, Director of Regional Affairs at Hawaii-based think tank Pacific Forum.
Here is an excerpt from their conversation:
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Patrícia Vasconcellos: |
So before the invasion of Ukraine, we had the European Union, the UK, the US, and the Asia-Pacific countries as the main buyers of Russian oil. And now as you said, the main buyers are China and India. How big is Russia's market for those two countries now? |
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Robert York: |
Yes, I should also add that a big part of the reason for this basic surge in Russian imports to China and to India is due to the decline in the price of those exports. This is also led by the embargo imposed by the West, so yeah, Russia overtook Saudi Arabia as the primary source of oil to China: 107 million metric tons. Saudi Arabia trails at 86 million metric tons. So overall trade between Russia and China, they of course have their no-limits partnership [that] remains relatively strong and I would say on some level the changes are welcome. A decline in EU reliance on Russian fuel is something that the US and its partners have wanted to see for some time because they've wanted to see the EU become less susceptible to coercion out of Moscow. But this is definitely not what the US would like to see in, for instance, India, which is a partner it has very high hopes for in terms of countering the coercion of China. In May 2024, for instance, India’s month-on-month imports of Russian crude increased 8% and this has a lot to do with that decline in prices. There are some reports that have said that India is gorging on Russian fuel due to the decline in prices. Sanctions driving this lower cost of Russian oil are causing Indian refiners to buy in bulk, you might say. Yeah, well it is that it's also because there were things like Ukrainian attacks on Russian refineries, so that has caused them to make some changes to their oil prices as well. So yeah, those are some of the factors that are driving the changes in Russian exports of its oil.
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Tune into the Hinrich Foundation’s podcast series for insights on international trade.
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Author
Rob York
Rob York is Director for Regional Affairs at Pacific Forum. He is responsible for editing Pacific Forum publications. Prior to joining Pacific Forum, Rob worked as a production editor at The South China Morning Post in Hong Kong.
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