An oil refinery in Volgograd, Russia, on April 22. REUTERS PHOTOGRAPHER/Reuters

India has emerged as Russian President Vladimir Putin’s best economic friend. For the West, it wasn’t supposed to work that way.

In the past, India bought Russian crude oil in small quantities only. Today, it can’t get enough of the Kremlin’s black bounty, whose revenues are used to finance the Kremlin’s attack on Ukraine.

Russia and India were both being opportunistic. As the West piled sanctions and embargoes on Russia in the hope of crippling Mr. Putin’s war machine, Russia simply pivoted east to find buyers for its most valuable export – oil. Russia’s benchmark Urals crude was being offered at a discount of about US$30 a barrel to international prices, so India, sensing a bargain, took as much as it could find.

That’s the thing about oil. About two-thirds of the oil and refined products consumed around the world are delivered by ships. Ships can go anywhere at any time; pipelines cannot be moved.

According to Kpler, a commodities data an analytics company, from March to May, India took in more than 33 million barrels of Russian crude, double the amount it imported in all of 2021. India’s imports of Russian coal and fertilizers have also soared. China, too, is buying more Russian fossil fuels.

By now, it has become apparent that none of the West’s oil embargoes will cripple Russia’s economy and force Mr. Putin to sue for peace – the war is intensifying. Oil not sold in one market can be sold in another.

Yes, Russia will see its oil exports volumes reduced somewhat, but rising prices should more than compensate for that shortfall. Over the past year, oil of the Brent crude variety is up 64 per cent; it has climbed more than 15 per cent since the start of the invasion on Feb. 24.

Capital Economics last month forecast that Russian oil exports would fall about 20 per cent this year, even factoring in rising exports to India and elsewhere, but that high prices will keep its export revenues largely intact.

Last year, that income came to US$182-billion, which buys a lot of tanks, missiles and fighter-bombers. “In Europe, Russia won the energy game,” Leonid Nevzlin, the Russian-Israeli billionaire who was once a major shareholder in the now-defunct Russian oil giant Yukos, told The Globe and Mail in Tel Aviv last week.

The United States and Canada imposed oil embargoes on Russia weeks ago to essentially zero effect, since they were never big importers. This week, the European Union, which imports more than a third of its oil from Russia, announced a hard-won deal designed to stop 90 per cent of Russian exports by the end of the year, starting with a ban on seaborne shipments.

But Hungary, which is heavily reliant on Russian pipeline oil, won an open-ended exemption from the embargo. Slovakia and the Czech Republic are also expected to win exemptions.

The EU evidently knows its oil embargo may not work, or work well – and could even backfire if rising energy prices break voters’ resolve to punish Russia. Which is why the EU and Britain this week agreed to ban insurers from covering ships that carry Russian oil.

The move will shut Russia out the Lloyd’s of London insurance market, which forms the core of the global marine insurance industry. Without liability insurance, many ports would prevent oil-laden Russian ships from delivering their cargo.

The insurance ban is a potentially far more powerful punishment tool than the oil embargoes. But the EU has proposed a half-year phase-in, giving creative Russian shipping minds time to explore other insurance routes.

Russia might be able to use insurance markets in India or China, though neither country’s insurers have the clout or sophistication of Lloyd’s of London. Or Moscow could offer sovereign guarantees for ships carrying Russian oil.

If the oil embargoes or the ship insurance ban will not destroy Mr. Putin’s will to keep waging war in Ukraine, what might?

Banning natural gas exports to Europe might do the trick for the simple reason that pipeline gas cannot be diverted easily to other markets, as oil can. The EU imports 40 per cent of its gas from Russia. If Russia were to lose that market, it could not turn around and sell that gas to China. The pipelines in western Russia that deliver the fuel to Europe are not connected to the eastern pipelines.

Europe wants to end its reliance on Russian gas, but that process could take years. Because Germany, Italy and a few other EU countries happily made themselves slaves to cheap Russian gas, and considered it forever secure, they never built enough liquefied national gas (LNG) terminals to ensure diversity of supply – Germany has zero LNG terminals. Those terminals are now being constructed with alacrity, but won’t operate any time soon.

Meanwhile, new pipelines from the gas-rich fields in the eastern Mediterranean and North Africa are still in the theoretical stage, and renewable energy is not yet up to the job of replacing lost Russian oil and gas.

At this stage, the EU’s efforts to shut Russian energy out of its markets amount to little more than a PR exercise. Russia will lose energy sales, no doubt, but not quickly enough. India and other eager buyers of cheap Russian energy will ensure Mr. Putin can keep paying for his war for some time.

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