"As Russia scours the globe for buyers of its energy products, it is finding eager trade partners in an unlikely place: The oil-rich petrostates of the Persian Gulf.
Since Western sanctions over the conflict in Ukraine cut off Russia from many of its established trading partners, state companies from Saudi Arabia and the United Arab Emirates have stepped in to take advantage of discounted prices for Russian products, according to oil executives and industry analysts.
Despite U.S. objections, the Gulf countries are using the discounted Russian products internally, including for consumption and refining purposes, and exporting their own barrels at market rates, boosting their profits.
The Gulf countries, especially the U.A.E., have also become key storage and trading hubs for Russian energy products that can't be as easily shipped around the globe because of the sanctions.
The counterintuitive shift, in which countries with the world's largest reservoirs of oil are eager buyers of more, is an illustration of the unexpected consequences of Western sanctions and another example of the U.S.'s waning influence over the Middle East.
Russian oil exports to the U.A.E. more than tripled to a record 60 million barrels last year, according to data-commodity provider Kpler. By contrast, Russian oil exports to Singapore, another trading hub, rose 13% to 26 million barrels in 2022, according to Kpler.
Russian gas oil now accounts for more than one in 10 barrels of the product stored in Fujairah, the U.A.E.'s main oil-storage hub, second only to Saudi Arabian gas oil, according to Argus Media, a market-data provider.
Russia is shipping 100,000 barrels a day to Saudi Arabia, according to Kpler, compared with virtually none before the sanctions. That would equate to more than 36 million barrels annually.
U.S. officials have said the Saudi and Emirati trade in Russian oil and fuel products undermines Western efforts to tighten the screws on the Kremlin's revenue streams.
Treasury Undersecretary Brian Nelson toured the Middle East in February to try to persuade countries such as Saudi Arabia, the U.A.E. and Turkey to enforce the Western sanctions against Russia.
The U.S. Treasury and Saudi royal court didn't return requests to comment.
An Emirati official said the country abides by United Nations sanctions and has "robust processes in place to deal with sanctioned entities." "The U.A.E. will continue to trade openly and honestly with its international partners," the official said.
Saudi Arabia is increasingly pursuing a nationalist energy policy that takes precedence over U.S. concerns. Saudi and its allies this month announced an oil-production cut aimed at boosting prices, going against U.S. objections that higher prices aid the Russians.
The U.A.E. has adopted a neutral stance in the conflict, despite its longstanding security partnership with the U.S. After start of the Ukraine conflict, Dubai and other emirates have become an international hub of choice for many Russian companies and wealthy individuals seeking to run their businesses and protect their money while avoiding sanctions. But the oil trade is perhaps the most sensitive aspect of the burgeoning bilateral relationship.
Because of price caps and other sanctions, Russia's flagship Urals crude has typically traded at a discount of over 30% to benchmark Brent in recent months.
The arbitrage available for Gulf countries is especially pronounced in refined products such as naphtha, fuel oil and diesel. They are abundant in the Gulf "so the only reason for importing from Russia is to capitalize on the price difference," said Elshan Aliyev, head of the Mideast Gulf product department at Argus. Russian naphtha and diesel respectively sell $60 and $25 a ton below their equivalent produced in the Persian Gulf, he said.
In the past year, Saudi Arabia has ramped up its diesel exports to France and Italy, two countries that previously relied largely on Russia, Kpler data show. Moscow is "pretty much satiating the [Saudi] domestic market with discounted transportation fuels and freeing up volumes for subsequent diesel exports elsewhere," said Viktor Katona, a Russia-focused analyst at Kpler.
On March 12, national oil company Saudi Arabian Oil Co., or Aramco, reported record annual profit of $161 billion for 2022, the largest ever by an energy firm. That included a 27% boost to profits for the state-run giant's refining unit. Aramco declined to comment.
Meanwhile, the U.A.E. has become a major storage and re-export hub for Russian oil products, while some traders are making a brisk business shipping Moscow's cargoes to other destinations using the Gulf nation and its financial system as a base.
Private trading firms import from Russia to the U.A.E. mostly for re-export purposes to Pakistan and Sri Lanka or East Africa, Mr. Aliyev said.
Some of Russia's discounted oil cargoes are scooped up by Emirati state-run companies, including five shipments of gasoline to the Dubai-based Emirates National Oil Co. since December. In November, a cargo of 700,000 barrels of Arctic crude oil loaded by Russian government giant Gazprom PJSC was delivered to a refinery of the Abu Dhabi National Oil Co., which is owned by the emirate, Kpler data show.
ENOC and ADNOC didn't return requests to comment." [1]
Since the sanctions don't work on Russia, and the sanctions are raising prices and increasing recession risk in the West, the Western officials that created the sanctions have to be punished. The voters in the West are paying close attention to this (see D. Trump).
1. World News: Saudis, U.A.E. Grab Russia's Oil Products at Big Discounts
Faucon, Benoit; Said, Summer. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 18 Apr 2023: A.7.
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