Brazil oil sales to India and China in the first half of 2022 have fallen considerably, amid the Ukraine war and a significant increase in crude exports from Russia to the two Asian countries.
According to data from Brazil’s Foreign Trade Secretariat (Secex), in the first half of the year, Brazil exported 36% less oil to China than in the same period last year. Likewise exports to India fell 53.8%.
From January to June this year, Brazil exported some 1.2 million tons of oil to India, but in the same period, a year ago, the volume was 2.6 million tons. About 12.5 million tons of oil were exported to China in the first half of this year, while in 2021, some 19.56 million tons were shipped in the same period.
In dollars, oil exports to India fell from around US$1.09 billion to US$589 million (down 46%). Regarding China, exports went from US$ 8.06 billion last year to US$ 7.9 billion in 2022 (-2%).
Amid the war in Ukraine and sanctions imposed on Russian oil by the United States and the European Union, China and India, the two most populous countries in the world, have become the leading markets for Russian crude sales.
In a kind of “parallel market,” Russia offers oil at lower prices than those normally traded internationally, explains Roberto Dumas, professor of international economics at Insper and chief strategist at investment bank Voiter.
China’s oil purchase from Russia is also a way of showing their political alliance, explains Duma. “It’s an advantageous alliance for China; it buys oil from the country at a discounted price and then resells it at a market price,” he explains.
Consequently the price of Russian oil is more attractive than that of Brazil, which has experienced a reduction in its export numbers. According to Dumas, the tendency is for Brazilian exports to remain lower while sanctions on Russia’s natural gas and oil last.
The professor also believes that the United States turns a “blind eye” to this situation to prevent prices from booming. “Without Russian oil, the barrel would have gone to around US$160,” estimates Dumas.
Despite the sanctions in place, during the first 100 days of the war, Russia earned €93 billion from its fossil fuel exports, with about two-thirds of those gains coming from oil. During the period, China was Russia’s biggest importer of fossil fuels, and India increased imports, buying about 18% of the country’s fossil fuels.
In May, Russia overtook Saudi Arabia as China’s top oil supplier, according to data released by the Chinese government, after imports of Russian oil hit a record high of 28% from the previous month. According to freight data analyzed in June by Kpler, a market research firm, India currently imports more than 760,000 barrels daily from Russia's Vladimir Putin.