American purchases of laundered Russian oil worth at least $180 million to the Kremlin

In June, Global Witness exposed how Russian oil was still making its way into American cars through a little-known loophole in the US oil embargo. Today, we reveal that American purchases of this fuel contributed an estimated $180 million to Kremlin coffers between January and September of this year.

That’s enough to buy 105 of the Kalibr cruise missiles Russia has used to kill scores of Ukrainian civilians. It could also purchase over 8,600 of the Iranian-made drones that have recently been bombarding Kyiv.

By tracking oil from Russia to refineries across the world and onwards to American ports, Global Witness analysis of Kpler data shows that in the first nine months of 2023, refineries running on Russian oil exported 30 million barrels of petroleum products to the US. That was mostly in the form of gasoline and components used to make it.  

As Putin spends record amounts of Russia’s national budget on waging war, it is imperative that the US government tighten oil sanctions and end American imports that are funnelling money to the Kremlin.

When Russia invaded Ukraine, the US was one of the first Western nations to ban the import of Russian fossil fuels. But the refining loophole means that once crude has been transported outside Russia and turned into products like gasoline or diesel, it is no longer considered of Russian origin, and can legally be imported to the United States.

Refineries in countries including India and Turkey are cashing in on the loophole. They have massively increased imports of cheap Russian oil and are using it to produce fuels which they sell to the United States and other Western nations. The result is a laundromat for Russian oil, driven in part by Western demand, which undermines the embargos and keeps demand high for Putin’s most lucrative export. To be clear, this is legal: no sanctions prohibit India or Turkey from buying Russian oil, and once it has been “substantially transformed” (in customs-speak) into other products like gasoline, there are no sanctions prohibiting Western companies from buying or importing them.

Shipping data indicates that fossil fuel companies including Shell, BP, and Sunoco were amongst the importers bringing laundered Russian oil to American gas stations. Major commodity trading houses Trafigura, Vitol, and Gunvor also appear to have purchased cargoes which discharged in ports from New York to Louisiana and Houston.

These 30 million barrels, which constitute dozens of shipments, were refined using an estimated seven million barrels of Russian crude, mixed with oil from other sources. Using tax rates and revenues published by the Russian Ministry of Finance, we estimated that selling this crude to laundromat refineries generated anything between $180 million and $275 million in revenue for the Kremlin.

In Russia, the production and export of crude oil is taxed through the Mineral Extraction Tax and Export Duty. How much the Kremlin collects on each exported barrel is difficult to determine due to a complex system of tax exemptions and subsidies.

Our conservative analysis assumes that every barrel we accounted for was granted the maximum level of exemptions, meaning the lower end estimate of $180 million that went to the Kremlin in tax is likely a much higher number.

It is counterproductive for the US government to send billions in aid to Ukraine while simultaneously allowing for imports that directly fund Russia’s war machine. Yet this bind is easily fixed: the US government can and must close the refining loophole by banning imports from any refinery that purchased Russian oil in the last six months.

Laundromat refineries are a vital lifeline for the Kremlin, absorbing the supply of Russian crude that was banned from going to the G7 and EU. Over the same nine-month period, these refineries which are sending fuels to the US imported 300 million barrels of Russian crude oil, netting the Kremlin between $7.5 and $11.3 billion dollars in direct tax revenue.

Closing the loophole is a common-sense measure which would put downward pressure on the price of Russian oil, ensure that American consumers are not unwittingly filling their cars with Russian derived gas, and send a message to refineries that if they choose Putin’s oil, their products are not welcome in the United States.

At a time when Congress is consumed with arguments over government spending, this measure can be accomplished at no cost to the national budget, and without inflicting pain on American consumers. As Russian-derived fuel makes up relatively little of the US energy mix, gas experts and leading economists have stated that closing the loophole will not raise prices at the pump. To align with its promise of unwavering support for Ukrainian sovereignty, the US government should quickly act by severing America’s links to Russian oil.  

A Trafigura Spokesperson told Global Witness that “Trafigura terminated its long-term offtake contracts for crude oil and petroleum products with state-owned Russian producers in advance of European sanction…. Since then, we have not purchased Russian origin crude oil. We continue to comply with applicable sanctions.”

Vitol commented that “Sanctions restricting the purchase of Russian products do not prohibit the export of products from Turkish and Indian refineries, and Vitol conducts its business in full compliance with all applicable sanctions…we believe it is misleading to use words such as ‘laundromat’ and ‘laundered’ in this context given the obvious associations of such words with criminal activity.”

Gunvor replied that “Gunvor strictly adheres to all applicable international economic sanctions and regulations, including those of the U.S., UK, and EU, and we maintain an open dialogue with relevant governments to ensure we are aligned with the intention and evolving nature of these frameworks.”

Shell responded to Global Witness by referring us to their FAQ under petroleum products which states that “in full compliance with sanctions, other refinery-operating companies in third countries may continue to import Russian crude in order to transform it into a range of products that various communities need. Also in full compliance with sanctions and aligned with government guidance, Shell does not currently exclude purchasing products that have been refined from Russian crude by third parties in such countries.”

BP and Sunoco declined to provide a response when contacted by Global Witness.