Sunday's Energy Absurdity: You Will Never Guess Who Benefitted Most From US/G7 Sanctions on Russian Oil

Ok, well, maybe most of you will guess correctly.

Sunday's Energy Absurdity: You Will Never Guess Who Benefitted Most From US/NATO Sanctions on Russian Oil

[Follow me on Twitter/X at @EnergyAbsurdity]

I and many other observers ridiculed the decision in 2022 by the US/EU/G7 alliance to try to impose a price cap on crude oil coming out of Russia. The system of attempting to enforce it was destined to be too complex for even the combined bureaucracies of these increasingly authoritarian government entities to police, and cheating would inevitably become rampant.

But give credit where credit is due (even if it is credit for Soviet-style brutish behavior): The de facto Axis of the West was able to have some success in cutting the price Putin and the Russians could receive for its oil through a program of bullying insurance and shipping companies with threats and penalties (i.e., sanctions) if they dared to assist the Putin regime and its shell companies.

At the end of the day, though, Russia has managed to maintain a strong flow of crude exports onto the global market, albeit at prices that have been discounted to prevailing global and regional benchmarks. This has resulted in a system in which countries outside the G7 umbrella have been able benefit economically by obtaining Putin’s crude at discounted prices, creating a bifurcated global market from which the world’s two most populous nations - India and China - have mainly benefitted.

What’s that? China benefitting from ham-fisted geopolitical decisions made by Western nations? Perish the thought!

Yes, that’s a thing, and you don’t have to take my word for it.

Reuters reported about it all Saturday in a story headlined, “China defies sanctions to make Russia its biggest oil supplier in 2023.”

Oh.

Here’s a key excerpt from that story:

BEIJING, Jan 20 (Reuters) - Russia leapfrogged Saudi Arabia to become China's top crude oil supplier in 2023, data showed on Saturday, as the world's biggest crude importer defied Western sanctions to purchase vast quantities of discounted oil for its processing plants.

Russia shipped a record 107.02 million metric tons of crude oil to China last year, equivalent to 2.14 million barrels per day (bpd), the Chinese customs data showed, far more than other major oil exporters such as Saudi Arabia and Iraq.

Imports from Saudi Arabia, previously China's largest supplier, fell 1.8% to 85.96 million tons, as the Middle East oil giant lost market share to cheaper Russian crude.

[End]

The House of Saud won’t be happy with that outcome, but Putin is gleefully counting his billions of China-derived rubles somewhere in the Kremlin even as you read this.

Even worse for the Axis of the West, the rising demand for Russian crude from India and China had the effect of boosting the prices derived from the sales to well above the idiotic “cap” set by the West, as shown in this chart from the Reuters article:

As a result, we can add this ridiculous, unenforceable price cap to literally every other action taken by western governments related to their equally idiotic, heavily subsidized and unachievable “energy transition” to the list of suicidal actions that inevitably accrue to the benefit of one country: China.

At some point, we’re all going to be forced to accept that this inerrant outcome is not a glitch of the overall plan, but a feature of it.

That is all.