Daily Management Review

Despite Sanctions, Turkey Manages To Save $2 Billion On Purchase Of Russian Oil With Increased Imports


Despite Sanctions, Turkey Manages To Save $2 Billion On Purchase Of Russian Oil With Increased Imports
Turkey and Turkish enterprises saved almost $2 billion on energy bills in 2023 by increasing imports of inexpensive Russian oil and processed goods, according to a Reuters estimate based on LSEG statistics and dealers' estimations. Despite Western sanctions, Ankara wants to buy more from its neighbour.
Following Europe's decision to stop importing the majority of Russian gas and oil due to Russia's invasion of Ukraine, Turkey emerged as the largest importer of Russian energy in the Western Hemisphere. China and India are the two countries that import more from Russia than Turkey, but Ankara is benefiting from lower freight costs compared to other buyers because of its closeness to Russian ports.
According to LSEG data and estimations by Reuters, Russian crude oil exports to Turkey reached a record high of 400,000 barrels per day (bpd) in November 2023, making up around 14% of Russia's total seaborne oil exports that month.
The energy ministry of Russia chose not to respond. Requests for comments were not answered by Turpas, the STAR refiner, or Turkey's energy ministry.
Following the private Russian oil producer Lukoil's agreement with the Azeri company SOCAR to process up to 200,000 barrels of oil per day at Socar's Turkish STAR refinery, trading sources predicted that supplies to Turkey would increase even more in the upcoming months.
Turkey's imports of Russian diesel, heating oil, jet fuel, and marine fuel increased 200% between January and November 2023 to reach approximately 0.29 million barrels per day, in addition to the rising supply of petroleum.
According to dealers and LSEG data, Russia exported 13 million tonnes of distillates, including 8.6 million tonnes of ultra low sulphur diesel (ULSD 10ppm), to Turkey between January and November of 2022, as opposed to 4.3 million tonnes of distillates, including 3.2 million tonnes of ULSD, during the same period in 2022.
According to merchants, Turkey has been paying $25 to $150 less per tonne ($3.3–20 per barrel) of Russian diesel this year than it has been paying for comparable grades in the Mediterranean.
There were discounts ranging from $5 to $20 per barrel for crude. Reduced import costs for energy have assisted Ankara in reducing its trade imbalance and relieving pressure on its currency, which has lost 30% of its value this year.
According to LSEG data, Turkey's diesel exports jumped by 120% during the same period, from 2.75 million tonnes in January to November of 2023 to 6.03 million tonnes.
Numerous activists and proponents of Ukraine have charged Turkey with effectively assisting Russia in evading sanctions by channelling its products to Europe. The nation disputes the allegations and maintains that it is exporting refined fuels made from different kinds of crude.
Turkey is not the only country to benefit greatly from its purchases of Russian oil.
India increased its imports of Russian oil by 77% this year so far, despite the country's refusal to join the sanctions against Moscow. Based on government figures, it has saved almost $2.7 billion on Russian oil imports in the first nine months of 2023. However, India purchased 1.7 million barrels of Russian oil per day, which was far more than Turkey did, meaning Turkey saved significantly more money per barrel.
According to traders, freight charges can be lowered because, at present, a tanker carrying Russian oil costs $6 million to convey to Turkey rather than $9 million to India.
According to Viktor Katona, an analyst at Kpler, since Russian sanctions were put in place in February 2022, Turkey's refineries have grown to be among the most successful in the Mediterranean.
According to Katona, throughout the last year, Tupras, the biggest oil refiner in Turkey, achieved a gross profit margin of $30 per barrel, which is $6 per barrel more than the average margin for a sophisticated refinery in the Mediterranean. According to Tupras, following the EU's significant reduction in Russian gas sales, Moscow and Ankara are also talking about establishing a centre for Russian gas in Turkey. The idea supports Ankara's long-standing ambition to develop into a significant hub for the delivery of energy in southern Europe.
Russia views the hub as a means of selling some gas into the EU in an indirect manner or rerouting its gas exports from Europe.