Laundromat Countries [UPSC Notes]

A new report has said that India leads the “Laundromat” countries buying crude oil from Russia and selling processed oil products to European countries. This is an important topic for the UPSC exam International Relations section.

India Leads ‘Laundromat’ Countries

A report titled “Laundromat: How the price cap coalition whitewashes Russian oil in third countries” published by the Helsinki-based Center for Research on Energy and Clean Air (CREA) has found that oil from Russia is getting backdoor entry into Europe via Laundromat countries.

• “Laundromat” countries refer to those nations that are involved in purchasing cheap crude oil from Russia and converting it into refined petroleum products, which are “laundered” in Europe and other G7 countries.
  • India, China, Singapore, the U.A.E. and Turkey are named as laundromat countries.
• As per the latest CREA report, among the five laundromat countries, India has remained the highest global consumer of seaborne Russian crude and is exporting close to 3.8 million tonnes of processed oil products to “Price Cap Coalition” countries.
  • The “Price Cap Coalition” bars trade and insurance for any oil purchased above a certain price from Russia.
  • The Price Cap Coalition countries include the European Union (EU), G-7 countries, Australia and Japan.
• The report has highlighted that the Western countries have purchased about $42 billion worth of laundered Russian crude in the form of various oil products from nations that are friendly towards Russia.
  • For instance, the exports of diesel from India tripled to about 1,60,000 barrels per day in March 2023 as compared to the period before the start of the Russia-Ukraine war. 

Key concerns

• The report notes that the European countries are simply substituting oil products they previously bought directly from Russia, with the same products now “whitewashed” in other countries and bought from them at a premium.
• It highlights the fact that the back-door entry of Russian oil into European countries has blunted their efforts to restrict funding for Russia. 
• The report has further accused Indian sellers and European buyers of circumventing sanctions imposed on Russia by the Western countries.

Private Indian refiners

• Most of the oil products from India were exported from two ports in Gujarat namely – 
  • The Sikka port that services the Reliance-owned Jamnagar refinery.
    • The report claims that Sikka port is the largest importing port of seaborne crude oil from Russia in the world as well as the largest oil product export port to the price-cap coalition countries.
  • The Vadinar port that ships oil products from Nayara Energies, which is co-owned by a Russian oil company named Rosneft.
    • According to the report, the Vadinar port is of great value to Rosneft and the overall Russian oil industry.

Conclusion

• A recent report by the Center for Research on Energy and Clean Air (CREA) has found that European countries that have imposed a ban on Russian oil imports are instead importing huge amounts of refined oil commodities from countries that have become the largest importers of Russian crude.
• The report notes that this development is a major loophole that undermines the impact of the sanctions on Russia and recommends the use of “place of origin” certifications for the oil products sold to Europe.

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