Russia is considered one of the superpowers of the world. The country’s oil reserves have always helped it to be at the point of discussion in every nook and corner of the world. Even when the western countries imposed strict sanctions on Russia, its oil demands were not affected. And this has outraged countries like Iran in the Arab world.
Russia – a challenge for Iran
Recently, Iran slashed its oil prices in the aftermath of Russia gaining a strong foothold. Iran is an OPEC member country that has recently surpassed Saudi Arabia as the top supplier to the world’s biggest importer – China.
Amidst the rising shortage of oil in the world, Russia became the saviour of many. But soon, with Russia’s war on Ukraine, the western countries along with others issued strict sanctions on Russia. Even after this, the country didn’t face any negative consequences; rather it benefitted from the soaring oil prices worldwide. Amid the sanctions imposed by the western countries, Russia has now concentrated on its alternate markets, which are India and China.
Over the last few months, Russia has become a significant oil supplier to India. It even left Saudi Arabia behind by becoming the second-largest oil supplier to India. According to a report, Russia’s oil and gas export revenue reached a record high of $98 billion during just 100 days of the war. Most of the revenue came from the European Union customers. From this, it is apparent that Russia left everyone behind in the competition.
The incessant growing prevalence of Russian oil in the world has now affected various OPEC countries. This has propelled them to slash down their prices, to mark their existence in the highly competitive market.
Read more: The Russian Oilonomics and how Putin outfoxed the Western Sanctions
Russia came forward for India
Just after counties imposed economic and financial sanctions on Russia, India started to support the country by importing its oil. With, India refusing to take any side in the United Nations voting against Russia, the move was reciprocated with an offer of cheap oil.
Amid the soaring inflation worldwide, Russia became a potential replacement for OPEC and India soon took this opportunity. Within the span of just three to four months, the Russian oil share in India surged from measly one per cent to twenty-five per cent.
As per a report published in May, the world’s third-largest oil importer received more than 24 million barrels of Russian crude in May. However, in April, it was up from 7.2 million barrels and about 3 million in March. In addition, the country apparently received 28 million barrels in June.
Apart from this, China is the world’s largest importer of oil. According to Moscow Times, China’s crude imports rose to 12 per cent, marking 10.8 million barrels per day in May. The communist country was Russia’s top energy importer during the first 100 days of Ukraine’s invasion of Russia. It is also estimated that the country will import $14.4 billion worth of oil and gas in 2022.
China is not a new partner of Russia in terms of importing its oil reserves. In 2021, China imported 800,000 barrels of Russian oil per day. However, in May this year, it is estimated to have purchased approximately 1.1 million barrels of oil per day.
Read more: TFI’s prediction comes true, India close to clinching oil deal with Russia
Importance of Asia for OPEC
The Organisation of Petroleum Exporting Countries (OPEC) had once secured a huge courtesy for its oil supply to the world. The organisation has been a huge contributor to various countries, especially the Asian countries.
In the year 2021, OPEC supplied 72.4 per cent of its oil to Asia. It’s here that Russia started eating into its import market. The bulk of the Asian oil supply is consumed by India and China. Both countries are rapidly developing economies, due to which their fuel consumption is not going to decline in the near future. As it turned out, India is availing nearly 25 per cent of its oil import needs from Russia, while China imported more Russian oil than India.
OPEC to follow Iran?
Though Iran always maintains its separate political identity from the oil cartel, this time, it has shown that it is willing to go against the fundamental purpose of OPEC’s existence, which is making the oil trade mutually profitable for every member of OPEC.
Now, Iran is prioritizing its own profit at the expense of the OPEC. It has paved the way, and if it wants its relevance OPEC needs to follow.
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