As people in Europe suffer from US-led sanctions on Russia, Asian giants like India buy cheap oil

YEREVAN (CoinChapter.com) — It has been ten months since the collective West decided to punish Russia for its unilateral invasion of Ukraine. The United States and the European Union (EU) levied heavy sanctions on the Kremlin, hoping to hit the country’s economy to force Vladimir Putin to end his war. However, this plan seems to have backfired. Not only has it not succeeded in ending the war, but has created a massive energy crisis. Meanwhile, countries like India have reaped the benefits, gaining much-needed access to cheap Russian oil.

The economic crisis, fueled as a result of the war and made worse by the sanctions, has impacted ordinary citizens everywhere. While the arms industry has made a killing from the constant supply of arms to Ukraine, people in several countries have to bear the brunt of so-called “Western solidarity”. 

Europe in severe crisis amid sanctions on Russia

The West’s economic sanctions on Russia were aimed to cripple its economy, render its people into poverty, and fuel a popular uprising against Vladimir Putin. However, it seems that this strategy has backfired. 

Instead of Russia, Western Democracies have found themselves in deep economic turmoil. Soaring food inflation and high energy prices have created an unprecedented crisis. 

In several European capitals, citizens have come out to protest against the growing inflation. In the United Kingdom, many families have resorted to eating pet food to survive. Food and non-alcoholic beverage prices in the UK rose by 16.5% in the 12 months to November 2022, slightly up from 16.4% in October.

Year-on-year, non-household gas prices in the first half of 2022 increased in all 25 EU Member States that reported those prices, according to Eurostat data. These increases ranged from 67% to a whopping 271%.

Average household electricity prices in the EU during the first half of 2022 increased sharply compared with the same period in 2021. It spiked from €22.0 per 100 kWh to €25.3 per 100 kWh. According to Eurostat, Czechia, Latvia, and Denmark registered the largest increase (expressed in national currencies) with +62% and +59%, and +57% respectively. 

The consequence comes as no surprise. Earlier this year, some European leaders had expressed concerns that Europe could stand to lose more than Russia from sanctions on the Kremlin. 

“The question is: If we ban oil, will it hit Russia or EU economies harder? Russia is selling oil to other countries and will get money that way,”  

Politico quoted a senior Central European diplomat saying.

Recommended: Did Europe just shoot itself in the foot by sanctioning Russia?

Eurozone heading into recession

The United States has spearheaded the campaign against Vladimir Putin. In an attempt to push its agenda, the White House has coaxed and bullied its global partners to comply with its agenda. 

This has left Europe in shambles. According to the European Commission’s autumn economic forecast, the eurozone and most EU countries will experience an economic recession in the last quarter of 2022. 

“The EU is among the most exposed advanced economies (to high prices), due to its geographical proximity to the war and heavy reliance on gas imports from Russia,” 

the European Commission said in a statement.

The Baltic countries are among the hardest hit. In Lituania, inflation reached 22.9% in November. Latvia is also experiencing one of the highest inflation in the eurozone at 21.7% in November, compared to 7.4% a year ago. Meanwhile, in Estonia, inflation reached 21.4%. 

Earlier this year, the International Monetary Fund (IMF) also raised red flags for the situation in Europe. According to Kristalina Georgieva, the managing director of IMF, at least half of the 19 countries that use the euro will experience a recession as a result of the war in Ukraine.

“Europe is affected more severely by the increase of energy prices. The heat on European economies is such that we actually expect half of the countries in the eurozone to experience at least two quarters of negative growth. In other words, the loss to the European people is quite, quite dramatic,” 

she said. 

Europe’s decision to follow US’s lead in sanctioning Russia has come at a large cost. Not only are such actions affecting millions of innocent Russians who themselves suffer under Vladimir Putin, but are also impacting the lives of millions in Europe. 

Europe’s loss is India’s gain

While the United States and Europe have punished their citizens by refusing to buy Russian oil, other countries have jumped in to fill the gap. India, for example, has refused to join the West in its miscalculated adventures. Not only has the Indian Government slammed US-backed attempts to shame its decision, but has increased oil imports from Russia.

The decision comes as no surprise, given the strong historical and diplomatic ties between Moscow and New Delhi. However, beyond diplomacy, India’s approach has been quite logical. 

Russia has offered to sell crude oil to New Delhi at large discounts, below the price cap in the buyer’s market. As a result, it has for the first time emerged as a top oil supplier to India. On its way to the top, it replaced Iraq as India’s may oil source. 

As per a recent report by Reuters, India’s oil imports from Russia totaled 908,000 barrels per day in November. This is a 4% increase from October, marking the fifth straight month of rise. India imports about 4 million barrels per day. As a result, Russian oil accounted for about 23% of its overall import in November.

A select few get rich from Russian oil imports

Such heavy discounts from Russia do not seem to reach Indian citizens. While the Government earns billions via Russian oil, it is only the oil giants in India that buy cheap oil. 

Some citizens in the country have alleged that they have not seen any easing in petrol and diesel prices. According to them, private players like Reliance Industries and Nayara Energy buy around 3/4th of this discounted Russian oil. 

“Less than 1/4th of cheap Russian oil has gone to public oil refineries like IOC, Bharat Petroleum, Hindustan Petroleum etc, even though they make up 90% of India’s fuel needs,” 

one user alleged.

China is also another major importer of Russian oil. In March, combined oil imports by China and India from Russia were more than those from the 27 EU member states. And it has only increased ever since. 

The decision to punish Russia has failed, thanks to Asian economic giants. In essence, while people in Europe continue to struggle to heat their homes, Russia sells gas through other channels. 

Earlier this year, the EU signed a deal with Azerbaijan to ramp up oil imports in an attempt to replace Russian oil. However, 

Russian energy giant Gazprom subsequently signed a deal with the State Oil Company of Azerbaijan Republic (SOCAR). Under the agreement, Russia will ship up to 1 billion cubic meters of gas to Baku up to March next year. 

In essence, Europe is still importing Russian gas, albeit via Azerbaijan. So the entire exercise of sanctioning Russia is ineffective and only hurts ordinary people. 

The European Union has in essence shot itself in the foot and is having to bear the consequences of sanctioning Russia. Meanwhile, Russia keeps its oil exports going while Asia benefits from the US-led mistake.