Oil Laundering: How did Russian oil circumvent the European Union’s embargo?

Tadashi Ito and Kiyoyasu Tanaka

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: This paper examines whether the EU’s 2022 embargo on Russian crude and refined oil unintentionally encouraged “oil laundering” through third‑country refiners. After the ban, Russian crude prices fell, creating strong incentives for countries such as China, India, Turkey, Singapore, and the UAE to purchase discounted Russian oil, refine it, and legally re‑export the resulting petroleum products to the EU. Using a gravity‑model framework and event‑study analysis, we show sharp and synchronized shifts in trade flows: Russian crude exports to laundromat countries surged dramatically after 2022, while EU imports of refined products from these same countries rose significantly in 2023 and 2024. These patterns suggest that Russian oil entered the EU indirectly through third‑country refining. China and India appear to be the primary intermediaries. In contrast, other sanctioning countries such as the U.S., Canada, Australia, and Japan show no similar increase, and EU members exempt from the embargo also display no laundering‑related import changes.

Pages: 31 pages
Date: 2026-03
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:26024

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