The war in Ukraine is causing a realignment in the energy sector which may have geopolitical consequences. It starts with the fact that the war involves Russia, the third largest producer of oil and one of the main suppliers of natural gas by pipeline to Europe.
For instance, in May, China and India together purchased from Russia 2.4 million barrels of oil per day, equivalent to one half of Russian total exports of crude. Despite the fact these purchases are made at a 30 percent discount, given world oil prices above $100 per barrel, the International Energy Agency estimates Russian oil monthly revenue has increased 50 percent since January to $20 billion.
In June, India’s imports of Russian oil are estimated to reach 1.15 million barrels per day, from 600,000 in March, surpassing Iraq, the former main supplier, which will export around 1 million barrels per day.
The same is happening with liquified natural gas (LNG). Between February and April, China’s imports from the United States decreased 95 percent from a year earlier, while imports from Russia increased 50 percent. Also, China’s imports of Russian oil increased in May to the point of replacing Saudi Arabia as the main supplier.
Meanwhile, in Europe, Germany is implementing a three-step plan to deal with reduced deliveries by pipeline of natural gas from Russia.
