How Oil is Adding Fuel to Global Fragmentation

In the latest episode of the Foreign Press Podcast, the Association of Foreign Press Correspondents (AFPC-USA), our orgination examines the ways the oil industry contributes to global fragmentation, with significant ramifications.

Economic sanctions imposed by the West since Russia’s February 2022 invasion of Ukraine have served as the basis for an ongoing pressure campaign, an attempt to neutralize Moscow amid the largest humanitarian crisis the European continent has faced in decades. While sanctions on oil exports exist, new buyers have stepped in, undermining efforts to keep Russia in check. Additionally, Russia's export revenues dropped by 6% in May, due to voluntary production cuts of crude oil, according to recent research.

Enter Robert York, an expert and contributor to the Hinrich Foundation, a Singapore-based think tank dedicated to promoting sustainable trade. York is the Director for Regional Affairs at the Pacific Forum, responsible for editing Pacific Forum publications. Prior to joining Pacific Forum, York worked as a production editor at The South China Morning Post in Hong Kong.

A PhD in Korean history at the University of Hawaii at Manoa, York is a regular commentator on inter-Korean and Indo-Pacific affairs, as a regular contributor to NK News, The South China Morning Post, The American Conservative, The Journal of American-East Asian Relations, and China Review International, as well as conducting numerous interviews in various media outlets. His research agenda at the Pacific Forum includes trade and its relationship with security, media analysis, countering disinformation, and human rights.

Journalist Patrícia Vasconcellos, a White House correspondent for the Brazilian network SBT, spoke with York at length, facilitating an enlightening and informative conversation for our audience of foreign correspondents.

This episode of the Foreign Press Podcast was produced in partnership with the Hinrich Foundation. AFPC-USA is solely responsible for the content of this episode. 

Patrícia Vasconcellos: Hello! Welcome to the Foreign Press Podcast. I’m Patrícia Vasconcellos. This podcast is an educational program by the Association of Foreign Press Correspondents in the USA (AFPC-USA). This episode is produced in partnership with the Hinrich Foundation. On today’s program: How Oil is Adding Fuel to Global Fragmentation.

In February 2022, Russia invaded Ukraine and since then economic sanctions [have been] imposed by the West, [which] has been trying to neutralize and put pressure on Moscow on oil exports that are also sanctions but shipments have remained steady as new buyers [are] stepping in. In May, Russia's export revenues dropped by 6%, the lowest levels since January, but due to voluntary production cuts of crude oil. That's what recent research shows to help us foreign journalists better understand those numbers about the global trading order and international politics. The Foreign Press Podcast interviews [Robert York today]. Robert, thank you so much for joining us today. Welcome to the Foreign Press Podcast.

Robert York: Yes, thank you for having me.

Robert York

PV: Robert York is the Director of Regional Affairs for the Pacific Forum, responsible for editing Pacific Forum publications. Prior to joining the Pacific Forum, Rob worked as a production editor at The South China Morning Post in Hong Kong. With a PhD in Korean history from the University of Hawaii at Manoa, Rob is a regular commentator on inter-Korean and Indo-Pacific affairs, as a regular contributor to NK News, The South China Morning Post, The American Conservative, The Journal of American-East Asian Relations, and China Review International, as well as conducting numerous interviews in various media outlets. His research agenda at Pacific Forum includes trade and its relationship with security, media analysis, countering disinformation, and human rights. Robert York, again, welcome to the Foreign Press Podcast. 

So different analyses show that economic sanctions against Russia are not working as planned, right? What [are] sanctions from your perspective are actually doing to the global trading order?

RY: I would say that they're not working as planned in the sense that they aren't actually deterring Russia's moves in Ukraine and it's also causing a change in where Russia is importing its oil. So, its imports to the European Union are down and its imports to the United States, while [they are never] a huge chunk of the American market also down. I should say overall that crude oil revenues for Russia did decline substantially in 2022 and 2023. So, it's not as though the sanctions have had no effect, it's just that we're seeing the embargo imposed by the G7 countries and also Australia forcing Russia and oil exports to be redirected from Europe to Asia, Africa as well. But let’s zero in on Asia for the time being. In 2023, Russia became China's top source of crude oil imports. So, you can see that China is picking up much of the slack that came from Russia's decline in oil exports to the West and this is a trend that we're seeing in a few areas. So, while Russia is exporting more oil to China and also to India, you're seeing other countries, say like Ukraine for instance, become more reliant on the West and also South Korea beginning to shift its reliance in that direction as well, away from China and its partners. And so we're seeing something of a bifurcation in the global trading order. 

PV: So, if you could help us to better understand this new trend as you already started to do now: So before the invasion of Ukraine, we had the European Union, the UK, the US, and the Asia-Pacific countries as the main buyers of Russian oil. And now as you said, the main buyers are China and India. How big is Russia's market for those two countries now? 

RY: Yes, I should also add that a big part of the reason for this basic surge in Russian imports to China and to India is due to the decline in the price of those exports. This is also led by the embargo imposed by the West, so yeah, Russia overtook Saudi Arabia as the primary source of oil to China: 107 million metric tons. Saudi Arabia trails at 86 million metric tons. So overall trade between Russia and China, they of course have their no-limits partnership [that] remains relatively strong and I would say on some level the changes are welcome. A decline in EU reliance on Russian fuel is something that the US and its partners have wanted to see for some time because they've wanted to see the EU become less susceptible to coercion out of Moscow. But this is definitely not what the US would like to see in, for instance, India, which is a partner it has very high hopes for in terms of countering the coercion of China. In May 2024, for instance, India’s month-on-month imports of Russian crude increased 8% and this has a lot to do with that decline in prices. There are some reports that have said that India is gorging on Russian fuel due to the decline in prices. Sanctions driving this lower cost of Russian oil are causing Indian refiners to buy in bulk, you might say.

PV: Sorry to interrupt: As India is declining or changing its price, is it to be more competitive in the market, you would say?

RV: Yeah, well it is that it's also because there were things like Ukrainian attacks on Russian refineries, so that has caused them to make some changes to their oil prices as well. So yeah, those are some of the factors that are driving the changes in Russian exports of its oil. 

PV: Well, our main public—we are talking [about] international correspondents such as myself who are based in the US working for big media outlets abroad. Could you highlight other trends in the research that you know our out agents, our colleagues, foreign journalists could access on the Hinrich Foundation website? Where should we look and pay attention to decide [what stories we work on] that maybe you’re not seeing in the media as it should be? Some ideas about what data we might look at?

RY: Continue to track Russian exports of fuel to Asia, for instance, but also to Africa. As of 2023, Russian shipments to Asia had surged 56% year on year and to Africa they were up 144%. This had come following a diplomatic offensive you might say, from Russian officials in the African continent. However, there are some real questions about how sustainable that is. It's certainly part of the Russian strategy to become more active in courting these global south countries in order to counteract the US-led world order and its ability to make impositions on the Russian economy. However, Nigeria has a new refinery that it inaugurated last May that's capable of producing 650,000 barrels per day. And that has been considered by some to be the beginning of the end, not only of Russia's outsized role in the continent, but Africa's over-reliance on external fuel imports as a whole. 

PV: So you're highlighting some countries in Africa [and as] we saw in those numbers, [there are] more exports to Latin America [and the] Middle East, as you said. Is it accurate to say that continents are adapting to this new reality? And maybe it’s too soon in our chat to ask this but maybe not. How can the West actually get what they want and stop losing markets? How can Ukraine allies “tighten the scrolls,” as you say in your research?

RY: I would say it starts with listening to those countries more attentively. There are of course considerable efforts being made by the US and its partners to counter the effects of a Chinese market expansion in Asia in the Indo-Pacific as a whole. And the Indo-Pacific is probably the main theater of the competition between the US and China. And it's considered the most dynamic region, but it's not the only game in town. And the US does not have the kind of mechanisms, I guess you could say, the diplomatic mechanisms that it needs to really reach countries in the global south and Latin America and needs to pay more attention to them. And I think the efforts it has made with India in particular; India has a great deal of credibility with these countries as well. That's definitely a first step, but really listening to them and really getting a sense of what their needs are; what do they need in order to become more self-reliant? Nigeria is evidently taking a major first step in this regard, but are there other countries that have this kind of potential and can also develop their markets in a similar way? So that's something that the US needs to do more of, the US and its partners I should say. 

PV: What is looking is interesting, that thought that you just wrote, that you believe from your perspective that the United States does not have the diplomatic tools, or not the tools, [but] you just said it does not have the same power that other countries have in South America and Latin America, for example. And you mentioned other places in the world. [Could] you develop this thought and how could they correct this?

RY: Well, the US took its outsized influence in Latin America, for instance, for granted. It has simply treated them as its backyard, I guess, ever since the Monroe doctrine 200 years ago. But now there are issues related to, for instance, Chinese investment in those countries. It has exploded in the last 20 years or so. And now there are concerns about Chinese development of Latin American markets and the US is starting to realize that it has neglected them for some time. But in terms of Africa, there's just not nearly enough attention being paid to Africa in particular. Anecdotally, I was in India in February of 2023. India, of course, was the host of the G20 for that year. And I was invited to speak at a university in Raipur in India, and there were a number of international students there from Africa, from the Middle East, and from elsewhere. 

And I gave a talk on an international peace building. At the end of my discussion, I got a lot of questions from the students from India, from Africa, and from elsewhere. And one student from Africa, I think he was from Ghana, asked a question that has really stuck with me ever since, which is when the US imposed these sanctions on Russian fuel, did it think about what that would mean for us? Because that meant higher prices for us. And that question really stuck with me because I didn't really have an answer for it at the time. We don't really think about these countries that are on the receiving end of Russian oil. We don't necessarily think about what is going to happen to them. And maybe sanctions are a better long-term strategy for dealing with Russia. As I've noted, this has had a considerable effect on Russian oil exports. It has weakened Gazprom, or the Russian state-owned monopoly and its bargaining power, for instance. But there is a lack of foresight. And part of the reason I think about this conversation a lot is I didn't get the sense that it was coming from someone who is anti-American in general. I mean, right after he asked this question, he immediately asked if we could take a picture together. So, I think what American policy makers—

PV: It’s a good question. That’s what we’re saying, right?

RY: Yeah, American policymakers don’t necessarily think about these outcomes. Other countries are not anti-American. They just wish America cared about them. 

PV: Interesting. Well, it’s a fact that the US [and] the UK disappeared from Russia’s map on exports on oil. What happened with the US oil market? Who were they buying from and how [does] this affect the world?

RY: Well, Russia's share of US imports of oil was never especially high. For instance, Canada is actually the largest source of petroleum exports by a pretty considerable margin. And their top five, in addition to Canada and Mexico, [are] Saudi Arabia, Iraq, and Brazil as of 2023. So yeah, Russia, its ability to impact the US market was never particularly big. As for the UK, the US is the primary source of their crude oil and natural gas liquids as well, followed by Norway. As for the EU as a whole, the US is actually one of the leaders in terms of exports of fuel along with Norway also. So, there's a general increase in the role of the US and Norway 

PV: As you just mentioned [regarding] that question you received from that student about the impact that those sanctions could have for them there right back in Africa: What is the impact of these changes in the market worldwide on oil exports? What is the impact of those changes in the price around the globe in the recent months?

RY: As of April, the price of a barrel of Brent crude oil, which is the international benchmark, had gone up 20% from December. [These were] the findings of some research that was published in The New York Times, as of May I believe. And this is driven not just by Russia, although the aforementioned attacks by Ukraine on a Russian refinery certainly did have a role in it, but it's also the production cuts by Saudi Arabia and countries aligned with it and concerns about the expansion of the Israel Gaza war, namely the potential for greater Iranian involvement as well. So all of these factors are driving an increase for the time being in oil prices, but whether or not that is a long-term effect or one that's simply going to fluctuate, I think will have a clearer sense of that in the coming months. 

PV: No, it's not clear now. That's what you're saying? To see if those trends are going to maintain?

RY: Yes, it's not clear that they're going to maintain, much less escalate. 

PV: And what about the gas market? Journalists, foreign journalists, we very much wrote about this, about Russia that had lost its main markets for gas, which were in Europe. What is the scenario now on gas? 

RY: Yes. If you look at the overall market in the EU in particular, it appears that their imports are down overall, and the main driver of that is the decline in Russian exports. So, we're seeing less of that and a somewhat increased role from the US and also from Norway, but not entirely making up for it. Again, this is a development the US and its partners have wanted to see for some time because the concern of Russia's ability to coerce the European Union is something that has been a concern for some time.

PV: So is it accurate to say that it's somehow the West now [that’s] working the way they want it” In a less coercive threat from the Russian market? Is it right?

RY: At least in terms of the EU, yes, seems to be a stronger position for them. The reliance that the EU had on Russia has diminished considerably, it appears.

PV: Well, they have more independence now.

RY: Yes, I guess we're going to see an outsized role for Norway in the future. 

PV: And is it correct to say that Russia still remains brilliant in the European G7 shipping industry? Is there still this connection? 

RY: Yes. So Russian seaborne crude oil and its products, there is a good share of that that is still subject to the oil price cap that was imposed. However, Russia has been trying to get around that by relying on what they call shadow tankers. 

PV: Explain this more for us.

RY: Yes. Basically you could say tankers that are not what they appear to be. This is something that North Korea has relied on for many years in order to avoid sanctions: ships that are not registered as they say they are. 

PV: Why?

RY: This makes them more difficult to track. Yeah, this makes it more difficult for them to track. And so yeah, Russian seaborne crude oil, a much greater share of that is being transported by these so-called shadow tankers. So yeah, that's something that they are employing more and more in order to get around sanctions. But this creates a number of issues and basically the risks that they present, these tankers tend to be older, they tend to be less well-maintained, and their crews tend to be less experienced. And this presents a considerable threat if one of them were to have an accident while carrying these oil imports. 

PV: It's very interesting. I'm not sure if all of our audience [knew] about all of those concepts and everything that you're just explaining now. So it's very important, changing a little bit of our perspective, [that] you analyzed the risks to ecology as an impact of sanctions. And this is a topic that we are very much concerned [about] all around the world. And could you broadly address this topic, the ecological, the impact on climate change? 

RY: Well, in addition to the contribution I should say to the push to get away from reliance on fossil fuels that this has revealed would be beneficial. Of course, Russia's fuel exports have been cause for concern since the Cold War even. And there's been much more interest in finding alternatives to that. The shadow tankers issue is something that presents an ecological issue in and of itself. If one of them were to have an accident because of their poorly maintained ships, because of their inexperienced crews or whatnot while carrying these fuel exports, there could be a considerable ecological issue related to the spill of that oil. So that is something that needs to be looked out for. That's something that we need to be aware of and we need to have contingencies in place. I would say the US and its partners need to be aware of that. If one of these ships were to have an accident and begin spilling large amounts of fuel, we've seen that in the past and that's something that has the potential to cause a concern wherever it takes place. 

PV: But are we, [is] the world, [are] nations prepared for that or do you see that we as the globe and different countries, need to be more engaged in order [to], in a proper way, tackle those risks that you just [presented]?

Hinrich Foundation

RY: Yeah, it's a good question. To what extent are the US and its partners actually preparing to address the effects of a major oil spill caused by one of these shadow tankers taking on a leak? To what extent are they coordinating? My guess is probably not enough. It's not something that I think that is being discussed very much so it's probably something that we will find out. We won't find out until one of these disasters actually happens. So, let's be hopeful that it does not in the meantime and that, yeah, either that or that we just have to hope for a change in Russian behavior in the next couple of years. 

PV: And Rob, I know you have some thoughts that you'd like to share with us about how this global train impacts the political order. If you could develop those thoughts and [explain] why you think it's important to address and to talk about this.

RY: China has, along with Russia, been targeting more of the global south countries in recent years. And a lot of that is due to these countries' perceptions, as I was getting at with neglect from the US and its partners. It's been said that China has a long-term objective of reshaping the global order. And that is because they want to change it to make the global order more in its own interests. Whereas Russia does not agree with the existence of a global order and has pushed back against it wherever possible, whether in Syria, Myanmar, and now Ukraine. But in both cases, there has been much more emphasis by these countries on reaching out to Africa, Latin America, and parts of Asia that feel neglected by international institutions and trying to forge alternatives. And the number of countries that have applied to join BRICS and been accepted into BRICS shows to what extent there is an interest in these alternative institutions. 

So, the increase in Russian oil exports to these countries is something that should have been anticipated, given the hunger that other countries have for oil and also for greater recognition. And so this is something that we need to actually put mechanisms in place in order to address. I think India, one of the things that they did in 2023 was invite the African Union into the G20, so now it's the G21. And so there's a greater effort, I would say, to try to incorporate these countries into the conversation. And these efforts really need to continue. The US has a number of means that it uses to engage with Asia, for instance, with East Asia, with Southeast Asia and now South Asia through US-India, bilateral dialogues. But we're not really seeing comparable efforts being made in the US outreach to Africa and also to Latin America and so on.

That might seem like a strange recommendation from somebody who is focused on East Asia and Indo-Pacific writ large. As noted, I have a background in Korea primarily, but China has really changed the rules of what Pacific or Asian engagement means because it is able to compete with the United States to a degree that we have not seen before. I mean, this far surpasses what the Soviet Union was ever capable of in terms of economic engagements. And so putting into place more mechanisms to engage more countries in the global south is something that would be beneficial, and that's something that we need to see more of. And hopefully that will be the focus of future US-India engagement. 

PV: Well, from here, from Washington, DC where I am, there is a feeling that there is still a desire from here that other countries, in other parts of the world like the global south, as you just mentioned, can be economically aligned with the decisions that are made here, concerning Russia, for example, and sanctions. There is still a hope or a desire for this economic alignment, although it is a free market. And what we have seen, as you just described, is natural alignment with countries that are trying to find new markets. So which lessons do you believe different nations have been learning in the past two years with all those decisions regarding sanctions and everything that we just spoke until now in our podcast, which lessons we have seen and learned, and if there is a different scenario in the future, if nothing changes? 

RY: Well, what a lot of these countries often complain about in addition to a general lack of attention from the United States, is that there seems to be different rules for different countries. I'm not endorsing this view necessarily, but many of these countries believe that there are different rules, for instance, for Israel than there are for Russia. And that there are different rules for the United States than there are for China. I think that there's context that needs to be unpacked, but that is definitely the perception. And I do think that there needs to be more of an effort to really take in the viewpoints from Africa, from Southeast Asia and South Asia and from Latin America into US policy and shaping US policy on trade, on international security, and so on. So, all of those things should be considered. And we also need to work with these countries. 

That's something that we at Pacific Forum have been trying to do, is try to unpack the different parts of the world that could potentially ease the US reliance on China for critical supply chains. The supply chains that were discussed in the Biden supply chain review at the start of that administration, such as in critical minerals, electric vehicle batteries, and so on and so forth. So,, there are other markets that could potentially contribute in this regard. And so, the US should have their eye on them and talk to them about what it would take in order for them to develop properly. Latin America could be a definite source for critical minerals, and I think Africa has its own role to play in a more diversified supply chain as well. So, we'll work with those countries on how to develop their own markets. 

PV: Robert York, our guest today in this Foreign Press podcast, thank you so much for this interview. 

RY: Thank you very much for having me.

PV: I spoke today with Robert York. This episode is produced in partnership with the Hinrich Foundation. Thank you all. See you next time.