Wednesday, October 5, 2022

‘Rafale Allies’ India & Greece Continue To Buy Russian Oil; Are Western Sanctions On Moscow Losing Steam?

The frequent use of sanctions on recalcitrant states for not towing the American line in international diplomacy may, one day, become a subject of criticism or opposition in the comity of nations and the UN Human Rights Commission.

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One crucial aspect of ever-increasing acrimonious relations between the democratic West and the two Eurasian superpowers, who are members of the United Nations Security Council with veto powers, is that the voice of the latter is often echoed in decolonized and developing countries.

The Asiatic countries, whatever the form of governments they have thrown up, have not seen the American penchant for the imposition of coercive sanctions as befitting the stature of the US.

This was the general impression when sanctions were imposed on Iran not once but twice, and this is the impression when sanctions were imposed on Russia after her armed conflict with Ukraine.

The diplomacy of carving out spheres of influence, as was the custom of the western colonial powers in the 19th and 20th centuries, has to be taken as a dispensable legacy to be discarded and forgotten.

That was precisely what India – the world’s largest democracy torn between the Westminster style democracy and Marxist-oriented socialism – tried to place before the US and her allies in the EU when they were considering the proposal of imposing economic sanctions on Russia in the aftermath of an armed conflict with Ukraine.

The time has come for western policy planners to reconsider the obsolete and perhaps counterproductive option of imposing sanctions.

The case of the sixth package of sanctions against Russia, which intends to impose an embargo on the purchase of Russian oil or its transportation to destinations, shows that the sanctions can be porous and may even defeat the very purpose for which sanctions were intended.

The story of Russian oil exports after implementing the sixth package is eye-opening. The self-sanctioning oil trader suspended carrying Russian oil by their tankers to the European markets.

Russia exported her oil to the European markets primarily by tankers and only a small quantity by pipelines. The tankers carried 75% of Russian oil to Europe. EU has not banned the export of Russian oil, but it has prohibited carrying Russian oil by their vessels.

Europe could not impose a ban on the supply of Russian oil because it depends on Russia for oil. However, Greece was exempted from the impact of the sixth phase because the shipping industry is the backbone of her economy, and she is a member of the EU.

The exemption proved a windfall for Greece. According to the Institute of International Finance (IIF), Greece’s share of transport of Russian oil to European markets grew from 35% to 55%.

Russian oil
Ships carrying Russian oil / Twitter

Thus practically, the embargo on the Russian oil supply proved ineffective. However, the other obstruction the EU contemplated was the threat of imposing secondary sanctions on international shipping firms and insurance companies to prevent Russia from sending oil by sea after December 5.

Now that Greece had been granted an exemption, India came to the help of Russia by certifying the entire Russian fleet as safe.

India’s certification of fitness of the Russian fleet was one of the reasons why President Biden had threatened to impose sanctions on India for importing oil from Russia at one stage.

But many Congressmen opposing the idea of imposing sanctions by the world’s strongest democracy on the world’s largest democracy thought it would be only ridiculous; Biden did not go further.

But when Secretary of State Blinken hurled an insinuation on Indian foreign minister Jaishankar that India was funding Russian terrorism by purchasing Russian oil, the artful Indian diplomat told him that the money which India poured into Russian oil in a month was equal to half a day’s money which the European countries poured into Russian oil.

Indian foreign minister was not indulging in a guffaw. According to S&P Global Commodities at Sea, “Russia was typically shipping around 30 million barrels of refined products to Europe every month, based on last year’s activity. From these volumes, around 20 million barrels each month referred to gas/oil/diesel, equal to up to 700,000 barrels per day (BPD).”

Russia has a well-developed shipping industry capable of supplying oil to prospective markets. She has built shipyard infrastructures in St Petersburg, Murmansk, and Vladivostok.

Investments have been made into advanced nuclear-powered icebreakers to keep the northern coast open for the movement of oil tankers. Russia plans to float nuclear power stations, which could be saleable to specific countries.

modi-putin
File Image: Modi and Putin

Again, the West’s intention of imposing the oil price scheme on Russia does not seem to have a prospect of success because China and India, the two biggest importers of Russian oil, are not likely to agree to participate in the scheme.

The question is whether Russia has a fleet of tankers and other carrier vessels that can serve its purpose of clipping the West’s wings of the oil embargo. Russia’s fleet of tankers is mainly run by the state-owned Sovcomflot Shipping Company and owns 122 vessels, plus 85 other-type vessels and ten icebreakers.

In March, Sovcomflot was added to the UK sanctions list and was later targeted by the US and Canada. The fleet is currently insured by the Russian company Ingosstrakh.

IIF report says, “Volumes of oil exports of crude from Russia this year are not only not depressed this year in August, but they are at record levels. Thanks to the war, Russia is exporting more oil today than it has ever exported.”

Between March and August 2022, IIF estimated that Greek-owned vessels failed to avoid Russian oil and boosted it. In the final analysis, the adverse impact of the oil embargo on Russia, as expected by the EU, will not happen. It has instead become counterproductive.

Hence, the policy planners in the western world have to re-visit the colonial legacy of doing the sword-rattling of sanctions on countries that nurture a different ideology and vision.

 

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