Whenever there is a sound of war in the world, the common man first gets frightened by the fear of inflation and rising prices of petrol and diesel. The current war between Iran and Israel has created similar fear in the global market. About 20 percent of the world’s oil passes through the Strait of Hormuz. Due to Iran tightening its noose on this narrow sea route, the oil supply chain has been badly disrupted. But amidst this global chaos, there is one country whose fortunes have changed overnight. That country is Russia. On one side the whole world is in chaos, while on the other side Moscow is having fun. After all, what happened that Russia, which was economically isolated by the Western countries, is today emerging as the biggest economic winner of this crisis?
Shackles of sanctions broken, flood of dollars coming into treasury
Till a few weeks ago the situation was completely different. Due to Ukraine war, the harsh sanctions of Western countries had broken the back of Russia’s economy. Countless ships filled with Russian crude oil were standing in the sea, but they were not finding any buyer. Now the tables have turned. According to a report in the ‘Financial Times’, Russia is earning an additional amount of about 150 million dollars every day since the blockage in the Hormuz route.
To control the wildly rising oil prices, America has had to relax its own rules. US Treasury Secretary Scott Besant has made it clear that temporary exemption has been given to buy Russian oil stranded in the sea. They argue that this is a short-term step that will not bring any major financial benefits to Russia. But the ground reality is telling something else. Russian oil, which was considered ‘untouchable’ till yesterday, is in huge demand today. Brent crude, which was selling around $73 before the war, has now reached $119 per barrel. Russia’s ‘Urals Crude’ which was sold at a huge discount, is now being sold at premium prices.
India is getting diplomatic benefits
This changing global scenario is also directly impacting countries like India which are heavily dependent on imports for their energy needs. After the blockage of the Hormuz route, Indian refineries, showing practicality, have rapidly increased the purchase of Russian crude oil. At the beginning of March, this figure jumped to 1.5 million barrels per day, which is 50% more than in February.
The interesting thing is that this time even Washington is not opposing this purchase. US Ambassador to India Sergio Gore recently acknowledged that India is an important partner in keeping global oil prices stable, and the purchase of Russian oil is a part of this effort. Till a few months ago, this changed stance of America was considered politically impossible.
Putin’s ‘masterstroke’ with dragon
Russia is laying a new chessboard not only on the oil front but also on the gas front. After snatching away a big market like Europe, Russia is now continuously sending LNG to China. According to Bloomberg report, China’s recent five-year plan mentions advancing the work of ‘China-Russia Central-Route Natural Gas Pipeline’ (Power of Siberia 2). This is a big strategic victory for Russia.
European Council President Antonio Costa has expressed deep concern over this entire situation. He says that so far there is only one clear winner of this war – Russia. These rising energy prices are providing Russia with new resources to fund its war against Ukraine, despite flouting international laws.
The longer the war continues, the more powerful Russia will become.
This is not just a time of economic relief for Russia, but it is also a return to its diplomatic dominance. As long as there is tension in the Gulf and the supply of oil through the Strait of Hormuz remains disrupted, Russia will have the upper hand. High prices, decreasing supply and compulsion of buyers have created an environment in Moscow’s favor that has supported its faltering economy.
This is no less than a lifeline for the Putin administration, which is struggling with fiscal deficit and huge war costs. In a conflict where the world is witnessing destruction and devastation, Russia’s oil sector is flourishing.