Middle Eastern supply cuts impact Asia; multiple Asian countries such as the Philippines and South Korea urgently turn to Russian oil.

The energy crisis triggered by the Middle East conflict is forcing many Asian countries to re-evaluate their sources of oil supply, with Russian crude oil filling the gap. On April 1, according to the Financial Times, after the U.S. issued a 30-day exemption for Russian oil sanctions last month, Asian countries including the Philippines, South Korea, Vietnam, Sri Lanka, Thailand, and Indonesia have successively resumed or expanded their purchases of Russian oil. According to a Wallstreetcn article, the U.S. Treasury Department’s Office of Foreign Assets Control previously issued a general license temporarily easing sanctions on Russian oil to address the shock to the energy markets caused by shipping disruptions in the Strait of Hormuz. Iran’s closure of the Strait of Hormuz has led to disruptions in oil transport, putting enormous pressure on Asian governments. Multiple countries have declared a state of energy emergency, launched four-day workweeks, encouraged working from home, and expanded fuel subsidies. Philippine President Marcos stated last week, "No option is off the table. We are considering every possible measure." Due to the impact of the Iran war and the resulting transport disruptions in the Strait of Hormuz, Brent crude, the international oil benchmark, surged 63% in March alone—the largest one-month increase in decades. [Image] Supply Disruption: Heavy Dependence on the Middle East, Asia Takes the Brunt Reports indicate that Asia is one of the hardest-hit regions in this energy crisis. Countries such as the Philippines, Vietnam, Malaysia, Thailand, and Singapore are highly dependent on Middle Eastern supplies for their crude oil imports, with the Middle East accounting for the majority of their total crude imports. After Iran’s closure of the Strait of Hormuz, oil and natural gas transport channels were blocked, leaving Asian countries facing not just a shortage of crude oil, but also disruptions in liquefied natural gas imports. To compensate for the shortfall in electricity and industrial gas, many countries have sharply increased their coal consumption. The report notes that the 30-day sanctions waiver issued by the U.S. last month provided Asian countries with a compliance window to procure Russian oil, prompting them to act quickly. June Goh, Senior Oil Market Analyst at Singapore-based commodity analytics firm Sparta Commodities, stated: “These countries are now extremely desperate and want to make the most of the U.S. sanctions exemption. Russia is the only available option. If someone offers you oil when you need it most, how could you possibly refuse?” Previously, about 85% of Russian crude oil exports went to India and another major Asian country. According to shipping data company Veson Nautical, the two countries held absolute dominance in Russian crude exports. As the U.S. softened its stance, other Asian nations also began to join in purchasing. The Philippines and India Actively Procure Russian Oil The report highlights that the Philippines is one of the most proactive countries in switching to Russian oil. According to data provider Kpler, two tankers carrying Russian oil arrived in the Philippines last week, the first such deliveries since November 2021. The Philippines’ sole refinery operator, Petron Corp, stated it had purchased 2.5 million barrels of Russian crude oil. Petron supplies about 30% of the country’s fuel and had previously relied almost entirely on the Middle East for its crude oil sources. The company emphasized that this purchase “is not part of its regular procurement strategy,” but rather “an extraordinary emergency measure taken out of extreme necessity after exhausting all commercially and operationally viable alternatives.” The Philippines has officially declared a state of energy emergency. President Marcos Jr. stated last week the nation would actively seek alternative supply sources not affected by Middle Eastern conflicts. Meanwhile, India’s activity in this round of procurement has also been particularly notable. According to Kpler data, Indian refiners purchased 1 million barrels per day (bpd) of Russian crude in February, and this had doubled to 1.9 million bpd by the end of March. To secure supply, India is even willing to pay a premium of about 5% above market price, causing some Russian oil originally destined for other markets to be redirected to India. Reliance, India’s largest private refiner—controlled by Asia’s richest person, Mukesh Ambani—also restarted Russian oil imports after the U.S. relaxed sanctions. South Korea, Vietnam, Thailand, and Others Follow, Negotiations and Procurement Progress in Parallel According to the report, South Korea has not yet purchased Russian crude oil but has bought 27,000 tons of Russian naphtha—a crude oil derivative used to produce plastics. South Korea is implementing a large-scale energy-saving campaign as supply pressures continue to climb. Vietnamese refining company Binh Son Refining and Petrochemical is in talks with Russian partners. Sri Lanka’s state-owned Ceylon Petroleum Corp told Bloomberg this week that it is also in negotiations with Russian oil companies. Officials from Thailand and Indonesia have publicly expressed their willingness to consider purchasing Russian oil. Analysts point out that as tensions in the Middle East persist and the U.S. sanctions waiver window is limited, whether Asian countries can secure enough supplies within the 30-day period will be a key variable affecting regional energy stability. Risk Disclaimer The market has risks, and investment should be cautious. This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investments made based on the information herein are at your own risk.