As Russia’s war in Ukraine continues, so too does controversy over the shipping of Russian oil, as western nations try to limit its contribution to Kremlin coffers. News yesterday (6 February) that the UK continues to import products produced from Russian oil has sparked anger in Ukraine, while the Russian government has today helped shepherd Russia’s largest search engine into domestic hands.
The IOE&IT Daily Update rounds up the latest trade stories from the region.
Oil loophole
A loophole in UK law has allowed the import of Russian oil products, according to research from by both the Centre for Research on Energy and Clean Air (CREA) and Global Witness. The research was reported on by the BBC.
Countries, including India and China, are said to be importing and refining Russian crude into oil products before re-exporting them to the UK and the EU.
CREA’s head of Europe-Russia policy and energy analysis, Isaac Levi, said:
"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 its price as well, which increases the funds sent to the Kremlin’s war chest.”
Global Witness’s analysis found that 5.2 million barrels of oil products made from Russian crude found their way to the UK over the course of 2023, amounting to a value of £569m, with most of it jet fuel. According to their research, one in 20 UK flights used fuel produced from Russian oil.
Brian Mulier of law firm Bird and Bird told the BBC that rules of origin meant the oil products were considered sourced from the country where refining took place:
“A change in origin is determined based on substantial processing. 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.”
Ukrainian government economic adviser, Oleg Ustenko, claimed it’s not difficult to introduce a more complete ban on Russian oil, adding “we have to make sure they do not have enough cash in their hands to continue this bloody war against us”.
Yandexit
The Dutch-based owner of search engine Yandex has withdrawn from Russia, selling off the business to Russian investors in the most expensive corporate exit since the country invaded Ukraine.
Reuters report that the deal, worth 475 billion roubles or $5.21bn, would see the country’s most popular search engine fall into the hands of a group including Lukoil, the nation’s second-largest oil corporation.
The deputy head of the Russian parliament’s committee on information policy, Anton Gorelkin, said:
“This is exactly what we wanted to achieve a few years ago, when Yandex was under threat of being taken over by western IT giants. Yandex is more than a company, it is an asset of the entire Russian society.”
The Kremlin facilitated the deal by mandating a 50% discount on the value of the business.
Bug’s strife
Insect-based meal production is among the niche industries suffering from a lack of export opportunities in a Russia increasingly isolated from European trade, according to All About Feed.
In recent years, the Russian authorities had considered liberalising laws around the use of insects in food production. Currently, insects are only permitted to be used in fish feed.
Liberalisation was considered as part of a broader strategy to strengthen trade ties with Europe, where the use of insects in animal feed would have allowed export of livestock to the EU under lower import duties. Those lower duties are in place as insect-based feed is considered by Europe to be an environmentally friendly practice.
After a collapse in trade with Europe following the invasion of Ukraine, companies such as the Russian firm Entoprotein have scaled back plans for large-scale production of insect-based meat products.
Deputy director for innovation at the Institute of Cytology and Genetics at the Russian Academy of Science, Pyotr Kutsenogiy, said:
“After 2022, the trade partnership between Russia and Europe has practically disappeared, and now we do not need to support European ideas regarding breeding insects.”
All for yuan and yuan for all
The Chinese yuan has replaced the US dollar and the euro as Russia’s “primary” foreign currency for carrying out international trade, Reuters noted last month.
Initially reported in the Kommersant newspaper, the shift marks increasing trade between Russia and China. A total of 42% of all foreign currency traded on the Moscow Exchange in 2023 was yuan, Kommersant found based on Exchange data.
China has used the yuan in its rapidly expanding trade in Russian commodities, while Moscow now considers the dollar and euro to be “unfriendly” currencies. Other friendlier currencies include the UAE’s dirham and the Indian rupee, trading in which has also grown in Russia.
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