Report: Russia deceives OPEC on oil sales to fund Ukraine war

LONDON — 

Russia is “flagrantly violating” its agreements with the OPEC oil cartel by concealing the true amount of oil it is producing and selling, according to a new report that says the profits are funding Moscow’s war on Ukraine.

The investigation by the Ukrainian Center for Defense Reforms asserts that Russia is breaching an OPEC agreement to cut oil production. The think tank is chaired by Oleksandr Danylyuk, a former chief adviser to the Ukrainian defense minister.

Oil cut

“In 2016, amid declining oil prices and to stabilize the market, OPEC reached an agreement with ten additional oil-producing countries, including Russia. The participants in this expanded format, known as OPEC+, agreed to reduce oil production, leading to a natural rise in global commodity prices,” the report says.

However, the authors say that Russia has “flagrantly violated its obligations under the OPEC+ agreement” by concealing the true extent of its production and sales, thereby exceeding its production quota “by no less than 2.57 million barrels per day (28%) on average during the first four months of 2024.”

$60 billion

That has enriched the Kremlin, said report co-author Danylyuk.

“It’s about $60 billion per year. And it's also important because this is the money which is not seen by anyone,” Danylyuk told VOA. “And obviously, this is extra funds Russia can use to support the war efforts in Ukraine. This is actually the money they can use to buy microelectronics, to buy explosives, to buy shells, to pay countries like North Korea and Iran.”

The report claims Russia is concealing the true volume of oil sold to its two biggest customers, India and China.

“To disguise these deliveries, Russian authorities list zero value for certain contracts in the customs declarations,” says the report. “Over the first four months of 2024, Russia exported at least 789,000 barrels of oil per day more to China than officially reported. During the same period, exports to India exceeded official statistics by at least 280,000 barrels per day.”

Shadow fleet

In addition, Moscow is using a so-called shadow fleet of tankers to mask the true scale of its oil sales.

The vessels “frequently change flags or ownership structures, deliberately deactivate the Automatic Identification System, falsify location under the influence of electronic warfare, and use other deceptive shipping practices.”

By comparing discrepancies in shipping data, the Center for Defense Reforms estimates that Russia is exporting an unaccounted crude oil volume of around 1.5 million barrels per day above its OPEC quota through the Baltic Sea and Black Sea.

Smuggling

“Paradoxically, because Russia started using those sophisticated methods of smuggling its oil, they are able not just to fool the West and to hide the oil supplies from sanctions, but also to hide them from their partners in the OPEC+ club,” Danylyuk said.

“The real scale of the operations is actually much higher than most observers believe — $60 billion literally stolen from other OPEC+ countries,” he added. “I don't think that OPEC originally was founded to have members like that, right? So it's not fair. It's not how cartels usually work.”

Russia response

Russia has not directly addressed accusations that it conceals oil sales from OPEC. The Kremlin had not responded to VOA requests for comment at the time of publication.

Speaking at September’s Russian Energy Week forum in Moscow, President Vladimir Putin insisted his country was a reliable partner.

“Russia fulfills its obligations to supply energy resources to the world market and plays a stabilizing role in it by participating in such authoritative formats as OPEC+,” Putin said in a September 26 address to the conference.

OPEC also did not respond to VOA requests for comment. In a press release issued Sunday, OPEC said that Russia — along with Iraq and Kazakhstan — had “strongly reaffirmed” their commitment to cut oil output.

Danylyuk said the interests of the West and OPEC were now aligned, “because the West doesn't want Russia to make money and OPEC doesn't want Russia to steal money from them.”

“Obviously, the only way to reduce Russia's ability to make that money is to just reject them from OPEC,” he told VOA.