Hoot of the Day: Russian Oil Gets to US Via Sanction Loophole

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by Mish Shedlock, Mish Talk:

I describe the roundtrip process in which Russian oil refined in Italy makes its way to to the US. It’s a real hoot.

The Wall Street Journal has an interesting video that describes How Russian Crude Avoids Sanctions and Ends Up in the US.

With an upfront ad, that is a free WSJ video link.

The Lukoil Connection

TRUTH LIVES on at https://sgtreport.tv/

Image composite from WSJ video below 

Image composite from WSJ video

Sanction Avoidance Process 

  • US sanctions are on crude oil, not refined products.
  • Lukoil, Russia’s second largest oil and gas company was not sanctioned by the US.
  • Lukoil’s refinery in Sicily is the second largest in Italy and fifth largest in Europe.
  • A Lukoil refinery in Italy once processed crude from multiple countries. Now it inputs are 93 percent from Russia.
  • After refining, the country of origin is Italy, not Russia. This is due to longstanding practice of changing the country of origin to where oil is refined.
  • The refined product then makes its way Exxon and Lukoil plants in New Jersey and Texas.
  • Lukoil still has a gas station presence in the US and it distributes products to eleven states.

Lukoil Stations in 11 US States

Image composite from WSJ video

Image composite from WSJ video

Note: Most of the 230 Lukoil gas stations in the US are owned by individual American franchisees, not the oil giant itself.

Understanding the Process

  • The US has sanction exclusions for oil “substantially transformed into a foreign-made product.”
  • US refiners cannot process Russian crude, but Italian refiners can, then distribute the product here.
  • In return, US can send its refined products to the EU, completing the round trip!

Lukoil is 6th largest refiner in Europe. It went from processing 30% Russian oil to 93%. That’s a pretty big sieve even if amounts to US are small.

Conveniently timed for the US election, European bans on Lukoil do not come into play until December 5.

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