The European Union (EU) imposed a ban on seaborne imports of Russian crude oil in response to the invasion of Ukraine, setting a price cap of USD60 for Russian crude oil.
The effectiveness of these sanctions is being undermined by five "laundromat" countries: China, India, Turkey, United Arab Emirates (UAE), and Singapore, according to a recent report by Helsinki-based Centre for Research on Energy and Clean Air.
These countries have significantly increased their imports of Russian crude oil, refining it, and exporting the refined products to the price cap coalition countries, effectively skirting around the sanctions and providing funds to Russia.
In the 12 months following Russia's invasion of Ukraine, these laundromat countries increased imports of Russian crude oil by 140%, amounting to EUR 74.8 bln. They are capitalizing on the discounted price of Russian crude oil as Russia struggles to find willing buyers. These countries are exporting refined oil products to price cap coalition countries, with an 80% increase in value terms, totaling EUR 18.7 bln. This is a legal loophole that allows the laundromat countries to provide funds to Russia by masking the origin of the oil.
The largest importer of oil products from laundromat countries among the price cap coalition is the EU, accounting for EUR 17.7 bln, followed by Australia (EUR 8.0 bln), the USA (EUR 6.6 bln), the UK (EUR 5.0 bln), and Japan (EUR 4.8 bln). The majority of imported oil products are diesel (29%), jet fuel (23%), and gasoil (13%).
China's monthly exports of oil products to Europe and Australia spiked in late 2022, while seaborne imports of Russian crude oil into the five laundromat countries increased by 140% in volume terms compared to the 12 months before the invasion. Since the EU crude oil ban, these countries have made up 70% of Russia's crude oil exports.
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