The European Union heavily sanctioned Russia and pledged to boycott its oil, yet continues to buy it, and at an even higher price, albeit indirectly.
India is importing record levels of discounted Russian crude oil, refining it, and exporting fuel to Europe at a profit.
Meanwhile, increasing energy costs in Europe have fueled inflation, causing workers’ wages to significantly decline.
The real wages of workers in the Eurozone declined by 6.5% between 2020 and 2022.
Bloomberg reported that, as of April, European imports of refined fuel from India are approaching 360,000 barrels per day.
This means that India is expected to soon surpass Saudi Arabia as the largest exporter of refined fuel to Europe.
At the same time, India is importing 44% of its oil from Russia, at an all-time high of approximately 2 million barrels per day, according to Bloomberg.
New Delhi is getting this crude with a significant discount.
India is on track to become Europe’s largest supplier of refined fuels this month while simultaneously buying record amounts of Russian crude https://t.co/VDxpiwPnIZ via @iamsharoncho pic.twitter.com/yM0G79TYdV
— Stuart Wallace (@StuartLWallace) April 28, 2023
In December, the G7 implemented a price cap on Russian oil of $60 per barrel.
The European Union agreed to the same price cap, before updating it in February with a $45 limit on petroleum products traded at a discount to crude and $100 for petroleum products traded at a premium to crude.
Facing Western sanctions, Russia instead sells its oil to Asia
The Western economic war has led to a slight decrease in Moscow’s oil revenue, but has simultaneously pushed Russia to deepen its integration with Asia.
An April report by the Kyiv School of Economics, “Russian Oil Exports Under International Sanctions“, analyzed the effects of the G7 and EU price caps in the first quarter of 2023.
The study was sponsored by the Yermak-McFaul Expert Group on Russian Sanctions, a group supported by the Ukrainian and US governments and co-chaired by Andriy Yermak, the head of the office of the president of Ukraine, and Michael McFaul, the former US ambassador to Russia.
It found that Russian oil revenue did decrease by nearly one-third in the first quarter of 2023. But this is not as much as many Western governments had expected.
Russia’s oil export earnings are now at approximately the levels they were at in 2021, before Moscow’s February 2022 invasion and the escalation of the NATO proxy war in Ukraine.
At the same time, the volume of Russia’s crude exports has stayed rather consistent.
What has significantly changed is not the amount of oil produced by Russia, but rather the customers for that crude.
The Kyiv School of Economics study showed that the vast majority of Russian oil exports now go to Asia, primarily to China and India.
Before the escalation of the proxy war in Ukraine in 2022, Russia had been Europe’s largest energy exporter.
The Financial Times noted that Russia’s northwestern port of Primorsk, on the Baltic Sea, had previously been used to send oil to Europe, but in the first quarter of 2023, India bought that crude instead, at a neat discount of just $43.9 per barrel.
This transition reflects Russia’s increasing economic and political integration with Asia, and its move away from the West.
Real wages of EU workers dropped by 6.5% amid “one of the worst cost of living crises since WWII”
While Europe buys more expensive Russian energy from India, workers at home are suffering from increasing energy costs.
“Households across Europe are facing a persistent pinch from one of the worst cost of living crises since the second world war, despite inflation falling almost as quickly as it rose”, the Financial Times reported in April.
The newspaper estimated that real wages in the Eurozone dropped by a staggering 6.5% between 2020 and 2022.
In the EU, real wages (workers’ compensation that is adjusted for inflation) are expected to stay 6% below 2020 levels until the end of 2024, the Financial Times added.
Inflation may be transitory, but the pain is set to last: “Households across Europe are facing a persistent pinch from one of the worst cost of living crises since the second world war, despite inflation falling almost as quickly as it rose.” pic.twitter.com/WWUg2KfIic
— Isabella M. Weber (@IsabellaMWeber) April 30, 2023
Workers in countries in the south of the Eurozone, like Greece, Spain, and Italy, have been especially hard hit, with their real wages falling by nearly 7%, 4.5%, and 3% in 2022, respectively.
The UK Office for Budget Responsibility “estimates that the period from the spring of 2022 to the spring of 2024 will mark the steepest decline in people’s real disposable incomes since records began in the 1950s”, the Financial Times wrote.
The newspaper warned, “Poorer people, who spend a bigger chunk of their income on essentials, have been most exposed to the rise in prices. They will continue to feel the squeeze hardest, with food costs continuing to soar even as energy prices fall”.
The Financial Times attributed this rapid decline in real wages to skyrocketing energy and food costs – which have been greatly exacerbated by Western sanctions on Russia.
Rising grocery bills are also a product of highly profitable price gouging by monopolistic corporations, as part of a growing problem that has been referred to as “greedflation”.
While real wages are declining across the West, the profit share of companies in the Eurozone is at a record high.
Bloomberg reported in 2022 that US corporate profits grew to their widest margins since 1950, “suggesting that the prices charged by businesses are outpacing their increased costs for production and labor”.
