Russian oil getting into UK via refinery loophole, reports claim

Millions of barrels of gas comprised of Russian oil are nonetheless being imported to the UK regardless of sanctions imposed over the conflict in Ukraine, analysis claims.

A so-called “loophole” means Russian crude is refined in international locations corresponding to India and the merchandise bought to the UK.

This is just not unlawful and doesn’t breach the UK’s Russian oil ban, however critics say it undermines sanctions geared toward proscribing Russia’s conflict funds.

The UK authorities denied there had been any imports of Russian oil since 2022.

But a spokesman stated internationally recognised “rules of origin” outline that crude, as soon as refined in a foreign country, is classed for the needs of commerce as originating from the refining nation.

But two separate reports, shared solely with the BBC, recommend the principles on refining allow merchandise comprised of Russian crude oil to reach on UK soil.

The Centre for Research on Energy and Clean Air (CREA) stated this “refining loophole” meant international locations corresponding to India and China, who haven’t sanctioned the Kremlin, are capable of legally import Russian crude and refine it into oil merchandise corresponding to jet gas and diesel.

They then export these merchandise to the likes of the UK and the EU.

“The issue with this loophole is that it increases the demand for Russian crude and enables higher sales in terms of volume and pushing up their price as well, which increases the funds sent to the Kremlin’s war chest,” stated Isaac Levi, head of CREA’s Europe-Russia coverage and vitality evaluation.

In a separate analysis paper, marketing campaign group Global Witness estimated that all through 2023, some 5.2 million barrels of refined petroleum merchandise that had been produced from Russian crude oil have been imported to the UK.

Most of the gas imported – 4.6 million barrels – was jet gas, which the group’s researchers recommended was utilized in one in 20 UK flights.

Lela Stanley, marketing campaign lead for the Ukraine group at Global Witness, stated whereas “the UK government falls over itself to decry the war in Ukraine, it remains complicit in the sale of Russian oil by keeping this refining loophole open”.

“Every single pound spent on Russian oil helps Putin pay for his brutal war,” she added.

The unique figures shared with the BBC from CREA estimated that throughout the first 12 months of the Russian oil ban from December 2022, some £569m value of oil merchandise imported by the UK have been derived from Russian crude.

Both reports claimed the so-called loophole not directly offered the Kremlin with greater than £100m in tax revenues.

They additionally stated the majority of the imports got here primarily from three oil refineries in India – Jamnagar, Vadinar and New Mangalore, together with 9 others in a number of international locations together with China.

Most of the estimates made by CREA and Global Witness have been based mostly on evaluation of oil cargo figures from knowledge and analytics agency Kpler, with pricing knowledge based mostly on Eurostat together with another knowledge sources.

Both CREA and Global Witness stated the 2 analysis papers have been based mostly on assumptions and admitted there have been challenges and limitations round analysing such commerce.

Figures from the International Energy Agency present that Indian imports of Russian crude have elevated for the reason that conflict in Ukraine started. In response to sanctions, Russia dropped its oil costs to draw new consumers.

Since the invasion, UK imports of Indian jet gas and diesel have additionally risen.

Russia is the world’s third largest oil producer. It extracts crude oil from the earth, which is then exported to refineries and turned into merchandise corresponding to petrol, diesel, jet gas and numerous plastics.

The Russian economic system is very depending on such exports.

But there are questions over whether or not the measures are as harsh as hoped after the International Monetary Fund not too long ago upgraded its forecast for Russia’s financial development in 2024 from 1.1% to 2.6%.

The sanctions have additionally had an affect on the international locations imposing them, with costs for each oil and fuel hovering as nations, primarily these within the EU, scrambled for brand new provides away from Russia.

A UK authorities spokesman stated since sanctions had come into impact, there had been “no import of Russian oil and oil products into the UK”.

He stated along with “providing proof that goods are not of Russian origin, importers must now include the country of last despatch to ensure oil from Russia is not being diverted through other countries”.

Brian Mulier, co-head of the worldwide commerce and customs group at regulation agency Bird & Bird, stated guidelines of origin in the end meant that Russian crude oil refined in a rustic corresponding to India could be classed as Indian oil.

“A change in origin is determined based on substantial processing,” he stated. “Once Russian refined oil products are substantially processed off the water in a jurisdiction other than the Russian Federation, they are no longer considered to originate in the Russian Federation.”

An oil business supply added that because the UK is just not self-sufficient in diesel it has to purchase it from someplace, and if it would not get it from India it dangers paying the next worth elsewhere, and passing the price on to the buyer.

But Oleg Ustenko, financial adviser to Ukrainian President Volodymyr Zelensky, referred to as on Western allies of Ukraine to toughen up the present sanctions to incorporate a full ban on all refined oil merchandise derived from Russian crude.

“We have to do everything possible to cut off finance to Russia. We have to make sure they do not have enough cash in their hands to continue this bloody war against us,” he stated.

“It should be done in these countries who are… really our allies. Starting in the UK, EU and US. It’s not difficult for the UK to introduce that kind of ban.”

CREA’s Mr Levi agreed that such a transfer would shut the refining loophole.

Matt Smith, an analyst at Kpler which is the supply of a lot of the analysis, stated whereas it’s inconceivable to separate which refined oil merchandise are produced from Russian materials, “it is fair to say at least some of the refined products going into Europe are produced from Russian material”.

The UK was due to this fact receiving oil merchandise from India that have been “likely to have been refined from Russian crude”, he stated.

Mr Smith stated whereas the so-called loophole was undermining sanctions, the scenario was complicated.

“It is impossible to extricate Russian crude or products created from Russian material from the global market,” he stated. “Russia is also such a key player that the powers that be don’t want to completely eradicate Russian supply from the global market because it would cause prices to spike.”

Last yr, some US lawmakers additionally pushed for a ban on gas imports from refineries that use Russian crude oil, with US representatives Lloyd Doggett and Joe Wilson introducing a bill to shut the refining loophole.

All three Indian oil refineries didn’t reply to the BBC’s requests for remark.