Refinery loopholes allowing Russian oil to enter the UK, according to reports

Despite sanctions imposed due to the crisis in Ukraine, research indicates that the UK is still importing fuel made from Russian oil in the millions of barrels.

Products refined from Russian crude and supplied to the UK are made possible by a so-called "loophole" in the regulations of nations like India.

Critics argue that this undermines sanctions meant to restrict Russia's war financing, even though it is not illegal and does not infringe the UK's Russian oil restriction.

The British government has consistently disputed that any oil has been imported from Russia since 2022.

However, according to a representative, "rules of origin" set out by the international community state that crude oil is considered to have originated from the country that refines it for commercial purposes.

"Closing the gap"

A number of Western nations, including the United Kingdom, have banned the import of any oil or oil products produced in Russia in an effort to reduce the revenue that Moscow receives from fossil fuels.

However, according to two sources that were shared exclusively with the BBC, the criteria for refining allow products made from crude oil from Russia to reach the UK.

According to the Centre for Research on Energy and Clean Air (CREA), governments that have not imposed sanctions on Russia can lawfully purchase crude oil from the country and process it into refined goods like jet fuel and diesel. This "refining loophole" allows countries like India and China to do just that.

They subsequently ship those goods to places like the European Union and the United Kingdom.

According to Isaac Levi, head of CREA's Europe-Russia policy and energy analysis, "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," meaning that more money goes into the Kremlin's coffers.

'Putin uses oil to fund troops'

Global Witness, an advocacy organization, predicted in a separate study that the United Kingdom bought over 5.2 million barrels of refined petroleum products made from crude oil imported from Russia in 2023.

According to the group's research, one out of every twenty flights in the UK used jet fuel, which accounted for the majority of the imported fuel (4.6 million barrels).

While "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," stated Lela Stanley, campaign lead for the Ukraine team at Global Witness.

"Every single pound spent on Russian oil helps Putin pay for his brutal war," according to her.

The first twelve months of the Russian oil embargo, which began in December 2022, saw the United Kingdom buy oil products with a value of over £569 million, according to exclusive data supplied with the BBC by CREA.

According to both pieces of news, the so-called loophole sent over £100 million in tax money to the Kremlin.

They also mentioned that three oil refineries in India—Jamnagar, Vadinar, and New Mangalore—and nine others in various nations, including China, accounted for the majority of the imports.

Kpler, a data and analytics company, was the primary source for the majority of the estimations provided by CREA and Global Witness regarding oil shipments; Eurostat and other sources provided pricing data.

While acknowledging the difficulties and constraints of analyzing this type of transaction, CREA and Global Witness both stated that the two studies were predicated on assumptions.

Since the conflict in Ukraine broke out, the International Energy Agency has shown that Russia has supplied more crude oil to India. Russia reduced the price of its oil to entice new buyers in reaction to sanctions.

Jet fuel and diesel from India have also increased in the UK's imports since the invasion.

When it comes to oil production, Russia ranks third globally. After being extracted from the soil, crude oil is sent to refineries to be transformed into a variety of goods, including gasoline, diesel, jet fuel, and polymers.

Exports of this kind are vital to Russia's economy.

A number of sanctions have been imposed on Russia by Western partners. One of these is an oil price cap, which prohibits Moscow from receiving more than $60 per barrel of crude oil.

Following the International Monetary Fund's recent revision of Russia's economic growth prediction for 2024 from 1.1% to 2.6%, concerns have been raised regarding the severness of the measures.

The sanctioning countries have also felt the effects, with oil and gas prices skyrocketing as countries, particularly those in the EU, rushed to find alternatives to Russian supplies.

Effects of penalties

According to trade data from January of last year, the United Kingdom bought no fossil fuels from Russia, despite the fact that the country sent £4.5 billion worth of gas, oil, and coal to the UK in 2021.

There has been "no import of Russian oil and oil products into the UK" since sanctions went into force, according to a UK government official.

He added that as well as "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" .

Russian crude oil refined in a country like India would be classified as Indian oil, according to Brian Mulier, co-head of the international commerce and customs group at law firm Bird & Bird. This is because of rules of origin.

"A change in origin is determined based on substantial processing," according to him. "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."

A source in the oil business elaborated by saying that the UK cannot produce its own fuel and must import it. Failing to import it from India might result in the country paying a premium price for diesel, which the government would then pass on to consumers.

Complete prohibition is not tough.

The economic advisor to Ukrainian President Volodymyr Zelensky, Oleg Ustenko, urged Ukraine's Western partners to further tighten sanctions by banning all processed oil products made from Russian crude.

Russian funding must be immediately and completely severed. "We must ensure that they do not possess sufficient funds to sustain this brutal conflict against us," he declared.

These nations are actually our friends, therefore that's where it ought to be done. Our journey begins in the United Kingdom, the European Union, and the United States. The United Kingdom might easily implement a ban of that kind.

Mr. Levi of CREA concurred that this course of action would seal the refining loophole.

"It is fair to say at least some of the refined products going into Europe are produced from Russian material," commented Matt Smith of Kpler, the research's main source, when asked whether it is feasible to determine which refined oil products are made from Russian material.

Thus, Indian oil products were "likely to have been refined from Russian crude," he claimed, and were being sent to the UK.

According to Mr. Smith, the issue was complicated, and the so-called loophole was weakening sanctions.

"It is impossible to extricate Russian crude or products created from Russian material from the global market," according to him. "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."

In an effort to seal the refining gap, two US representatives—Lloyd Doggett and Joe Wilson—introduced a measure last year to prohibit fuel imports from refineries that use Russian crude oil.

The three oil refineries in India that the BBC contacted for comment remained silent.

Refinery loopholes allowing Russian oil to enter the UK, according to reports

Mitchell D. Farrell 2

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