Moscow is bolstering its war budget from the surge in G7 and EU purchases of Russian fuel refined in Turkey.
Moscow has earned €750 million in tax revenues from G7 and EU purchases of Russian fuel refined in Turkey during the first half of 2024 alone, according to a new report by the Centre for Research on Energy and Clean Air and the Center for the Study of Democracy.
Despite the existing long-term ban on Russian oil imposed by the EU and the G7 states, the so-called “refining loophole” in the sanctions regime permits countries to legally buy oil products of Russian origin if it has been processed in a third country, such as Turkey, bypassing the sanctions.
The investigation found that the UK, US, EU countries and other Western partners of Kyiv have increased their purchases of oil products (mainly diesel, jet fuel and gasoline) made from Russian crude from three Turkish refineries by 62% compared to the previous year. In total, Western allies purchased approximately €1.8 billion worth of fuel made from Russian oil during the first half of 2024. Ukraine has repeatedly asked the West to close this loophole, pointing out that Russia is using export revenues to fund its illegal war of aggression. Recently, Russia has escalated its campaign of airstrikes against civilian facilities in Ukraine, deliberately targeting children’s hospitals, orphanages, and elderly care homes.
Meanwhile, Turkey has significantly benefited from the situation, increasing its dependence on Russian seaborne crude oil, with imports rising from an estimated 34% in 2023 to 70% in the first half of 2024.
US imports of Russian gasoline refined in Turkey could have powered nearly 339,000 vehicles per month — more than the total number of cars in Washington, DC. However, experts say that in the West, only big oil companies and traders, not the average person, benefit from such imports.
In turn, the US-sanctioned Russian oil giant Lukoil has earned €38 million in revenues from US imports of oil products from one of Turkey’s STAR refineries. The STAR refinery is Azeri-owned and 98% dependent on Russian crude, with 73% of its crude imports supplied by Lukoil, a company closely linked to the Kremlin. The authors of the report have labeled this ‘sanctions hypocrisy,’ indicating a clear breach of the intent behind the sanctions law.
According to the CREA report, the most effective step would be to simply ban the importation of oil products derived from Russian crude, while also sanctioning Lukoil-owned and operated refineries. This would potentially enhance the impact of the sanctions by disincentivizing third countries such as Turkey, India, China, and UAE, from importing large amounts of Russian crude and help cut Russian revenues. A relatively low reliance of the G7/EU (3%) on fuel refined from Russian crude means that a ban on these imports would have no significant inflationary pressure on domestic oil prices, argue the authors of the report.
Originally published in Ukrainska Pravda