War in Iran leaves Southeast Asia scrambling for oil from Russia

SINGAPORE: The war in the Middle East, which began when the United States and Israel started bombing Iran on Feb 28, effectively closed down the Strait of Hormuz, where 20% of the world’s total liquid petroleum consumption used to pass through each day. Asia, particularly Southeast Asia, has been hard-hit, given its dependence on the Strait for around 84% of its fuel needs.

There is now a recognised energy emergency in the region, and nations have not only been imposing conservation measures but have also scrambled for new sources of oil and gas.

Russia, one of the leading energy producers and exporters across the globe, has emerged as a winner amid the conflict in the Middle East, as countries in Southeast Asia have come knocking.

The US temporarily halted sanctions on Russian oil that is already at sea. It did this initially for India in the first week of March, but the easing of sanctions has spread. From March 12 to April 11, countries are allowed to buy oil from Russia.

Indonesia, the Philippines, Thailand, and Vietnam have since shown interest in buying oil from Russia.

The Philippines, a longtime US ally, has been one of the most vulnerable countries in the region. On March 30, Petron Corp, whose refinery provides 30% of the nation’s needs, has had shipments of at least four million barrels of oil cancelled since Feb 28. The company said it has entered an agreement to buy Russian crude.

“The purchases were undertaken strictly out of extreme necessity as an extraordinary emergency measure in response to unprecedented geopolitical and supply-chain disruptions and only after exhausting all commercially and operationally viable alternatives,” Petron said in a report.

An oil tanker with 700,000 barrels of crude from Eastern Siberia-Pacific Ocean oil from Russia arrived from Russia last week. The shipment has been consigned to Petron. After Philippine President Ferdinand Marcos declared a state of emergency on March 24, his administration said it was procuring 2.48 million barrels of crude oil from Russia.

While Indonesia has yet to purchase Russian oil, it signalled interest in mid-March. Sergei Tolchenov, the Russian Ambassador to Indonesia, said on Wednesday (Apr 1) that his government is open to the purchase of oil from Pertamina, the state-owned oil company.

Meanwhile, negotiations are underway for Vietnam to purchase oil from Russia. Prime Minister Pham Minh Chinh visited Russia from March 22 to 25, and met with two Russian oil and gas suppliers on a long-term basis. A partnership for developing oil storage infrastructure in Vietnam was also discussed.

Thailand has similarly held talks concerning buying oil from Russia, with Russia indicating a willingness to sell to the country. Reports say that the talks are being finalised, even as Thailand is also looking to purchase oil from Brazil and Nigeria. /TISG

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