Asian countries are intensifying their competition for Russian crude oil as the ongoing war involving the U.S. and Israel against Iran has severely constrained global energy supplies. This conflict has effectively shut down the Strait of Hormuz, which typically handles about one-fifth of the world’s oil shipments, most of which were destined for Asia.

Geopolitical Shifts and U.S. Sanction Easing

The escalating situation, further threatened by Iran-backed Houthi rebels impacting shipping routes, has forced a response from the United States. To stabilize crude oil availability, the U.S. has implemented temporary waivers on sanctions targeting Russian oil shipments that were already at sea. This easing was initially granted to India before being extended globally.

Rising Asian Demand Meets Russian Export Limits

While demand surges across Asia, Russia is realizing billions in revenue. However, experts caution that Moscow’s ability to significantly increase crude oil exports—unrefined petroleum essential for gasoline and diesel—is limited. Russia is already operating near its previous export peak.

Furthermore, Russia’s ongoing full-scale invasion of Ukraine, now four years old, and recent drone attacks by Kyiv on its energy infrastructure are hindering its export capabilities. Muyu Xu, a senior crude oil analyst at Kpler, noted that the opportunity for desperate Asian buyers is shrinking rapidly. She emphasized that the core issue is determining how much cargo remains available in the current market.

Southeast Asia Enters the Fray

Prior to the Iran conflict, China, India, and Turkey were the primary buyers of Russian oil, taking advantage of significant discounts despite Western sanctions aimed at penalizing Russia following its invasion of Ukraine.

The U.S. sanction waiver has spurred significant interest across energy-hungry Southeast Asia. This month, nations including the Philippines, Indonesia, Thailand, and Vietnam signaled new intentions to procure Russian oil. Manila, a long-standing U.S. ally, imported Russian crude for the first time in five years shortly after declaring an energy emergency.

Competition for Limited Cargo

These nations now face competition with China and India for approximately 126 million barrels of crude oil currently in transit, according to Kpler data. India, for instance, typically requires between 5.5 million and 6 million barrels of oil daily.

Analysts suggest Russia is unlikely to achieve sharp export increases. Flows in March reached about 3.8 million barrels per day, up from February’s 3.2 million, but still below the mid-2023 peak of 3.9 million barrels per day.

Xu stated that this crisis highlights how swiftly geopolitics can change based on the decisions of a few leaders, complicating long-term planning. She asserted that securing supply is currently the overriding priority, superseding other considerations.

The Philippine Energy Emergency

Southeast Asian countries vying for the diminishing Russian crude at sea are hoping the U.S. sanction waiver extends beyond April, Xu noted. Safer alternatives, such as crude from West Africa or South America, are geographically distant, meaning shipments would take months to arrive.

This leaves poorer nations scrambling, with airlines in the Philippines considering fuel rationing. Cash assistance is being distributed to vulnerable groups, such as transportation workers, as gas station queues often stretch for blocks.

The Philippines, with its population of 117 million, serves as an early indicator for the region. Kpler data shows that before the war, the nation sourced nearly 97% of its seaborne oil imports from the Middle East. Kairos Dela Cruz of the Institute for Climate and Sustainable Cities called the energy emergency declaration a “new frontier” in scale, warning it will push more people below the poverty line.

Diplomatic Moves in Southeast Asia

To mitigate shortages, the Philippines imported crude oil, marking its first such import since 2021. Vietnam’s Prime Minister Pham Minh Chinh recently visited Russia, securing agreements on oil, gas cooperation, and nuclear energy as rising diesel prices impact its manufacturing sector.

In Indonesia, officials indicated that “all countries are possible” partners for shoring up reserves, including Russia and Brunei, according to Energy Minister Bahlil Lahadalia. Putra Adhiguna of the Energy Shift Institute stated, “When you don’t have any other options, all options are on the table.”

Thailand is monitoring the situation but is reportedly less desperate than the Philippines. Jitsai Santaputra of The Lantau Group suggested Thailand might wait, provided the impact remains contained. However, fuel prices in Thailand rose significantly on March 26 after subsidies were lifted, with diesel increasing by roughly 18%.

China and India’s Advantage

China and India, major Russian crude importers before the Iran conflict, benefited from purchasing Russian oil at a discount while defying Western sanctions. India gained an early advantage when the U.S. eased sanctions on Russian crude about a week ahead of others. Xu confirmed that India “snapped up quite many cargoes” during this window.

By the time the waiver was extended to others, she noted, “it was already a bit too late because most of the cargo had already been ordered” by China and India.

Despite this head start, Kpler data suggests India’s Russian oil imports may not fully cover the Middle East shortfall. India’s Russian imports rose to about 1.9 million barrels per day in March, up from 1 million previously. Before the war, India imported roughly 2.6 million barrels per day from the Middle East.

Duttatreya Das of the think tank Ember warned that short-term buys only cover a few days of supply, making it difficult to fill gaps without extra shipments from North America, especially with peak summer demand approaching.

China’s Strategic Reserves

China, despite its strong domestic oil demand, maintains substantial strategic reserves, estimated by Kpler at 1.2 billion barrels onshore. This inventory equates to nearly four months of its overall seaborne crude imports, cushioning the immediate impact of the war.

China sourced about 13% of its seaborne crude from Iran and roughly 20% from Russia, according to LSEG. Given its reserves and financial capacity, analysts suggest some Russian shipments destined for China could be redirected to more distressed nations.

Sam Reynolds of the Institute for Energy Economics and Financial Analysis concluded that Russia is a major beneficiary of the conflict. He noted that the combination of crisis, speed of delivery, and lower prices gives Asia a “much larger incentive to import Russian oil.” Reynolds added that while moral arguments exist, this trend reflects countries prioritizing energy security above all else.