The embargo on Russian oil products isn’t working. Here’s why.
Every time you fill your car up at an Aussie fuel bowser, chances are that a percentage of the original source of the crude oil that makes up your petrol or diesel comes from Russia.
That shouldn’t be the case. Since 2023, there’s been an embargo on Russian-sourced oil due to the invasion of Ukraine, but it seems that there are still ways for companies to sidestep these regulations.
The key intermediary in this illicit exchange is India.
Over a third of India’s crude oil imports are sourced from Russia, its largest single oil supplier. There’s nothing illegal about that. India has never imposed sanctions against Russia.
That may well change, with the Trump administration threatening India with additional tariffs if it continues to rely on Russian crude.
Weaning themselves off this cheap supply is neither cheap, nor the work of a moment, as Indian Prime Minister Narendra Modi explained to President Trump in a meeting on 16th October. India refines the crude and then ships it to a number of global centres of petroleum exchange, the key one as far as Australia is concerned, being Singapore.
Singapore accounts for 49.4 per cent of all Aussie petrol imports, with another 14.1 per cent coming direct from India.
The second largest exporter of petrol to Australia is South Korea (21.4 per cent of our imports) and it too has no formal sanctions against Russia, but the country stopped importing crude petroleum directly from Russia in 2023.
It recognised the Indian backdoor route, and instead focused on importing crude from the United States, the United Arab Emirates, and Qatar.
Even this is not perfect as the Europe-based Centre for Research on Energy and Clean Air (CREA) has tagged five non-sanctioning countries – China, India, Turkey, United Arab Emirates (UAE) and Singapore – as key “launderers” of Russian oil.
More than 22m tonnes of Russian refined oil products have flowed through Singapore since 2023, according to analysis of commodity analytics firm Kpler trade data by Mark Corrigan, an Australian chemical engineer. The data has been independently verified by CREA.
Around 33 per cent of those volumes were routed through the Jurong Port Universal Terminal, part-owned by a Macquarie investment fund.
The US is pressuring India, but it can’t generate quite such leverage against the biggest importer of Russian oil, China. The US’ recent excursion into Venezuela likely weakens that negotiating position too.
"The actions of the United States are a typical example of unilateral bullying and economic coercion," Beijing’s foreign ministry spokesman Lin Jian said at a press briefing in October following the Trump-Modi meeting.
In order to not completely destroy the Russian oil industry and risk destabilising global markets, sanctioning countries initiated a ‘price cap’ system.
This worked by ensuring that companies shipping Russian oil outside of Europe were only able to access EU insurance and brokerage services if they sell the oil at or under $60 per barrel.
A number of illicit methods are being used to circumvent this system including ship-to-ship transfers in international waters.
CREA has proposed that the sanctioning countries leverage their insurance and shipping industries to ban imports from refineries receiving any Russian crude, halt imports of refined oil products of Russian origin, and ban maritime services in perpetuity to vessels used to transport Russian crude that doesn’t comply with the current price cap.
One thing’s for sure. There’s no quick fix for this issue. But until a solution is found, every time Australians fill up at the bowsers, they’re indirectly supporting the Russian petrochemical industry.
Andy brings almost 30 years automotive writing experience to his role at Drive. When he wasn’t showing people which way the Nürburgring went, he freelanced for outlets such as Car, Autocar, and The Times. After contributing to Top Gear Australia, Andy subsequently moved Down Under, serving as editor at MOTOR and Wheels. As Drive’s Road Test Editor, he’s at the heart of our vehicle testing, but also loves to spin a long-form yarn.
