Mark Corrigan | Australian government sanctions on Russian oil have failed

Few would have thought twice about the non-descript oil tanker appearing at Cape Solander later that morning before being guided into the Port Botany terminal to disgorge its load. Who knew where it came from, where it was going or what it was carrying. Who cared? Shipping news is not so popular in an age of container ships and tankers.

On this particular June Friday, the tanker delivered 23,152 tonnes of 91 octane petrol to the terminal, enough to refill almost 1 million Toyota Yaris tanks. The petroleum product had been collected three weeks earlier from a refinery in north-east China, one of many in that region.

A refinery that processes Russian crude oil.

How does Russian-derived petroleum product make its way to Australian shores within just 15 kilometres of Prime Minister Albanese's electorate office? Didn't the Australian government impose sanctions on Russian products? Aren't we part of the so-called "price-cap coalition"?

There are few issues on which Australians can agree so strongly as our support for the people of Ukraine under attack from Russia. Given the size and wealth difference between those fraught neighbours, we naturally stand up for the underdog.

We have found the brutality of Ukrainian cities being levelled, systematic looting, civilians raped, children kidnapped and soldiers mutilated to be overwhelmingly offensive. Reasons for invasion spruiked by Russian propagandists are ever-changing and fail to stand up to the pub test. What we see is old-fashioned imperialism rising out of the ashes of the USSR.

Importantly, Australia is still smarting from the 2014 shoot-down of MH17 by Russian-aligned forces in eastern Ukraine and the consequent loss of 27 Australian lives. We feel the injustice.

A 2023 Lowy Institute poll revealed that 87 per cent of our community somewhat or strongly support keeping strict sanctions on Russia. Unusually, Australian support crosses all the usual political and demographic boundaries. Coalition, Labor and Greens supporters are holding hands on this issue.

Even One Nation voters agree (although perhaps with slightly less enthusiasm).

One underlying assumption in Lowy's poll question is that sanctions are already strong. Our sanctions list certainly includes many Russian entities and individuals and restricts direct import and export of Russian goods and services. They are not only a form of national protest at the invasion.

Sanctions also incentivise an early withdrawal of Russian troops, penalise the aggressors and limit any military assistance that Australia-Russia trade may offer.

The evidence suggests that our sanctions are far from strong and slow down only the most direct trade paths. Thinly veiled loopholes mean that we are silently funding the missiles raining on Odessa wheat silos, the destruction of Ukrainian homes, schools and hospitals, or the endless stream of armed Iranian drones reaching Kyiv.

Russia's economy is largely dependent on oil and gas production. Prior to Russia's 2022 invasion of Ukraine, fossil fuels accounted for around 50 per cent of government revenue and 20 per cent of GDP. It was the world's second-largest exporter of crude oil. Oil and gas undoubtedly fund Putin's war effort, so international sanctions have logically focused on this sector. Australia includes many of the entities and individuals associated with Russia's oil and gas industry in its sanctions list.

Despite Australian government efforts and announcements in this regard, we remain active participants in the laundering of Russian oil. As consumers, we can easily choose to avoid purchasing the bottle of Russian Standard vodka on the shelves of the local bottle shop, but Australian motorists have no knowledge of the source of standard petrol purchased to drive to that bottle shop beyond the branding of the local service station signs.

Given that there are now only two remaining oil refineries operating in Australia and Bass Strait, oil production is well past the reserve's 20^th century heyday, country of origin is hidden behind layers of crude oil transport, refining, finished product shipment, terminals and distribution.

It is impossible for an Australian fuel consumer to make an ethical choice to avoid Russian oil short of buying an electric vehicle. We therefore must rely on our federal government to establish a trade framework that reflects the community's moral aspirations.

Consider how the June oil tanker came to deliver its tainted cargo to Port Botany.

At 4857 kilometres long, the East Siberian-Pacific Ocean (ESPO) oil pipeline is one of the longest in the world.

It was completed in 2012 to move oil from the wells of West Siberia to Russia's eastern seaboard.

The pipeline is operated by Kremlin-controlled Transneft. That company and its CEO, Nikolay Tokarev, are both sanctioned by the Australian government.

Major Russian companies exporting crude oil via ESPO include state-controlled Rosneft and Gazprom plus private sector Lukoil and Surgutneftegas.

Rosneft, its CEO and chairperson Igor Sechin plus many of its directors appear on Australia's sanctions list. Sechin has long been a close ally to Vladimir Putin.

The CEO of Gazprom, Alexey Miller, is sanctioned by Australia.

Lukoil, along with oligarch CEO Vagit Alekperov, is sanctioned. So is the President of Surgutneftegas, Vladimir Sivkovich.

The Australian sanctions list reads like a who's who of Russian oil trade. Surely that should give Australian motorists peace of mind.

Enter China.

In addition to supplying the port of Kozmino and a number of Russian east coast refineries, a spur from the ESPO pipeline exports to the state-owned China National Petroleum Corporation (CNPC) pipeline network supplying major refineries in Liaoning province of northeast mainland China.

Commodities analyst S&P Global reports that these refineries process a feedstock consisting of 15-50 per cent ESPO crude oil blend.

One such refinery, Jinxi, is operated by CNPC subsidiary Petrochina.

Shipping data shows that a tanker, the Hafnia Beijing, arrived at Jinxi port on 10 May 2023. Hafnia is a large Danish ship operator headquartered in Singapore who insist they "[believe] in zero harm to people". The tanker collected its load of petroleum product ready for delivery to Vopak's petroleum terminal at Port Botany on June 2. From there it was distributed to NSW and ACT outlets. Up to half of the imported batch is likely to have been extracted from Russian oil fields, operated by sanctioned Russian oil companies, run by sanctioned Russian individuals and delivered through a pipeline operated by another sanctioned Russian company.

Truly strong trade sanctions supporting Ukraine would not permit this to happen.

This is not the only example and is unlikely to be the last unless the Australian government actively closes loopholes enabling Russian oil product to reach our shores.

That same Chinese refinery using ESPO crude oil, Jinxi, also sold 49,500 tonnes of product to Australia in August 2022.

Nearby Dalian Petrochemical, also connected to the ESPO pipeline, sold Australia 106,000 tonnes in October 2022 followed by a further 14,700 tonnes in January 2023.

China also imports crude oil by sea from the Russian port of Kozmino at the end of the ESPO pipeline. Australia imports oil products from other Chinese refineries, but the Russian content of these products is made more opaque by seaborne deliveries.

Of course, China is not the only intermediate refining country laundering Russian oil before it reaches Australian markets.

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The Finland-based Centre for Research on Energy and Clean Air (CREA) recently highlighted the growth in imports of Russian crude oil to several major refining countries since the start of direct sanctions against Russia by the EU, most G7 countries and Australia. These "laundromat" countries include China, India, Turkey, UAE and Singapore.

China, India and Singapore are currently in Australia's top-10 suppliers of refined petroleum products.

India in particular has stepped into its third-party Russian oil refiner role with gusto. CREA reports that in the year immediately prior to Russia's invasion of Ukraine, India imported 3.85 million tonnes of Russian crude. This increased to a staggering 55.9 million tonnes in the year following, primarily through the Gujarat ports of Sikka and Vadinar. Vadinar's refinery is operated by Nayara Energy, an entity 49 per cent owned by Kremlin-controlled Rosneft. A further 24 per cent is owned through a complex web of companies by Russian private equity group United Capital Partners (UCP).

It was Orthodox Easter on April 16 this year. That day, Ukraine was hit with 50 Russian missiles and bombs in 24 hours. A church in Nikopol was shelled. While children painted traditional Easter eggs in their air raid shelters, President Volodymyr Zelenskyy commented in his Easter address that "perhaps the most difficult of the peaks is ahead of us."

Thousands of kilometres from Kyiv's mayhem, the tanker "Baru" berthed at BP's Kwinana terminal just south of Perth. The ship discharged 20 thousand tonnes of diesel fuel into BP's storage facility before resuming its ocean wandering. This refined petroleum grade was purchased from Nayara Energy's Vadinar refinery in India to be distributed to unwitting West Australians, enough to fill 500,000 Hilux utes. The refinery used Russian crude oil in a facility substantially owned by Russian state-controlled and private entities, even funded by a loan from the sanctioned Russian state-controlled bank VTB.

With each trade legally sidestepping sanctions, Australian dollars are moving counter to international oil flow, back through retail petrol outlets, terminals, oil industry traders and third party refiners, ultimately paying Russian oil companies. Profits or taxes from those trades are returned to the Russian government and ultimately help fund Putin's brutal war and occupation.

Australia has energy options. Our petroleum supply does not need to be at the expense of Ukraine's security. These planet-sized sanction loopholes that allow the import of Russian-extracted oil as petroleum products refined by intermediate "laundromat" countries must be closed. Revenue and profits from Australian trade cannot continue to be used to prop up Putin's aspirations for Russian Empire 2.0.

And Australian motorists must feel secure knowing they are not filling their Toyota with fuel tainted by Ukrainian blood.

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