Turkey saves billions on Russian oil amid sanctions, boosting imports

Turkey and Turkish companies have managed to save approximately $2 billion on energy bills in 2023 by significantly increasing imports of discounted Russian oil and refined products, a Reuters calculation based on LSEG data and traders’ estimates has revealed. Despite Western sanctions, Ankara expresses its intention to further strengthen ties with Russia, emerging as the primary importer of Russian energy in the Western hemisphere.

Rising Russian Imports and Savings

Following Russia’s invasion of Ukraine, European countries reduced imports of Russian oil and gas, turning Turkey into the largest importer of Russian energy in the Western hemisphere. Proximity to Russian ports grants Turkey substantial savings on freight costs, with estimates suggesting savings of $2 billion on energy bills this year.

Record High Crude Shipments to Turkey

In November 2023, shipments of Russian Urals crude oil to Turkey reached an all-time high of 400,000 barrels per day, accounting for 14 per cent of Russia’s overall seaborne oil exports last month. This surge in crude oil imports contributes significantly to Turkey’s energy cost savings.

Expanding Energy Partnership

Private Russian oil producer Lukoil recently signed a deal with Azeri firm SOCAR to refine up to 200,000 barrels per day of its oil at Socar’s Turkish STAR refinery, suggesting a further increase in supplies to Turkey. While Russia’s energy ministry declined to comment, Turkey’s energy ministry, Turpas, and STAR refiner did not respond to requests for comments.

Surge in Refined Product Imports

In addition to rising crude supplies, Turkey has witnessed a 200 per cent increase in imports of Russian diesel, heating oil, jet fuel, and marine fuel from January to November 2023, reaching approximately 0.29 million barrels per day. Russia supplied Turkey with 13 million tonnes of distillates during this period, compared to 4.3 million tonnes in the same period in 2022.

Economic Impact on Turkey

Turkey’s strategy of importing discounted Russian oil has proven economically beneficial, with reported savings of between $25 and $150 per ton of Russia diesel and $5-20 per barrel for crude. These savings have played a crucial role in helping Turkey narrow its trade deficit and alleviate pressure on its currency, which has devalued by 30 per cent this year.

Accusations and Denials

While accusations from activists and supporters of Ukraine suggest that Turkey is aiding Russia in bypassing sanctions, the country denies these claims, asserting that it is exporting fuels refined from various types of crude. Critics argue that Turkey’s actions may indirectly be helping Russia channel its products to Europe.

A Global Trend

Turkey’s approach to save on Russian oil purchases is not unique, as India, refusing to join sanctions against Moscow, has increased imports of Russian oil by 77 per cent in 2023, saving roughly $2.7 billion. Both countries enjoy significant savings on freight rates compared to other importers like India.

Strategic Talks on Russian Gas Hub

In the midst of these developments, Moscow and Ankara are engaged in discussions to set up a hub for Russian gas in Turkey. This initiative aligns with Ankara’s longstanding desire to become a major energy distribution hub for southern Europe, offering Russia an alternative route for its gas exports amidst reduced purchases by the EU.

(With inputs from Reuters)

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