ASEAN states eyeing Russian oil and gas choose short-term relief over geopolitical risks
analysis Asia
ASEAN states eyeing Russian oil and gas choose short-term relief over geopolitical risks
Any continued reliance by Southeast Asia on Russia for energy risks increasing Moscow’s leverage on bilateral relations and potential tension with other countries, say analysts.
KUALA LUMPUR: Southeast Asian states competing for Russian crude oil are prioritising easing domestic fuel shortages over potential friction with allies such as the United States or European countries which support Ukraine in its war against Moscow, say analysts.
Ukraine criticised a US decision on Apr 17 to extend a waiver allowing Russia to sell oil despite Western sanctions, saying that these proceeds will fund the war.
The US’ move allowed the purchase of Russian oil and petroleum products already loaded on vessels at sea until May 16.
The US argued that the waiver is meant to ease the energy supply crunch triggered by a separate war with Iran, which began in February, although analysts told CNA that Washington might still look unfavourably on countries buying Russian oil and gas.
The experts also warned that continued reliance on Russia for energy risks increasing Moscow’s leverage on bilateral relations and potential tension with countries in the Middle East, which have been attacked by Russia-aligned Iran and which also have long-term crude oil contracts with some Southeast Asian states.
“Countries must decide whether the short-term gains (of buying Russian energy) are worth the long-term repercussions,” said Yohanes Sulaiman, an international relations expert at Indonesia’s Achmad Yani University.
Association of Southeast Asian Nations (ASEAN) member states, including the Philippines, Malaysia, Indonesia, Vietnam and Myanmar, have shown interest in buying Russian oil and gas amid dwindling domestic reserves.
This comes as the continued closure of the Strait of Hormuz created an immediate physical shortage in a region that depends on the Gulf for over half of its oil and gas imports.
As a result, Southeast Asian countries turned to the next available energy source seen as near and affordable enough in a rush to secure supplies, analysts said.
“In this context, Russia offers available volumes with cargoes available at sea, which can be redirected to where they are needed,” said Abdelaziz Albogdady, market research and fintech strategy manager at financial services firm FXEM.
“At the same time, the temporary US waivers have made these flows commercially viable despite sanctions.”
But Albogdady warned that over time, dependence on a “geopolitically sensitive” supplier like Russia could create vulnerabilities and friction with the US and its allies.
“Additionally, reliance on Russian oil also increases exposure to disruptions as the Russian energy infrastructure is regularly subjected to damage,” he said.
Beyond geopolitical concerns, another question is whether there is enough Russian oil to go around.
Ukraine has launched attacks on Russia’’s energy infrastructure in the Black Sea and Baltic Sea, disrupting its ability to boost exports, said Muyu Xu, senior crude oil analyst at the global trade data firm Kpler.
Xu told CNA this has caused Russian exports to drop “slightly”.
“Ukraine is not happy with the US sanctions waiver, so they have been increasing their drone attacks on Russian infrastructure,” she said.
“Even though right now the market is really good - (Russia) can sell their oil at higher prices, and more countries are willing to take them - the real capacity is an issue.”
CAN RUSSIA EXPORT ENOUGH OIL?
Last week, Washington renewed a waiver allowing countries to buy sanctioned Russian oil and petroleum products already loaded on vessels at sea for about a month until May 16.
The latest move replaces a 30-day waiver that expired on Apr 11 and excludes transactions involving Iran, Cuba and North Korea.
It came after countries in Asia pressed Washington to allow alternative supplies to reach the market, even as Treasury Secretary Scott Bessent said days earlier that the waiver for Russian oil would not be renewed, Reuters reported on Apr 18.
Russian President Vladimir Putin’s special envoy Kirill Dmitriev said an extension of the US waiver will cover another 100 million barrels of Russian oil, bringing the total volume covered by both waivers to 200 million barrels.
But Kpler data shows that since March, the Philippines is the only Southeast Asian country to have imported oil cargoes from Russia, Xu said.
On Apr 14, Manila said it was seeking US permission to buy more Russian crude. The import-dependent country secured nearly 2.5 million barrels in March from Russia for its sole oil refinery after seeing at least four million barrels in shipments from the Middle East cancelled since the start of the US-Israeli war on Iran.
While Xu noted that other ASEAN states were negotiating oil purchases with Russia, she questioned how much cargo they could actually secure.
“Because right now, primarily the cargoes are taken by the Indians and the Chinese, so availability is an issue,” she said.
On Apr 18, Malaysia Prime Minister Anwar Ibrahim said that many European and American countries that previously sanctioned Russia were now competing to buy its oil, local media reported.
Citing Malaysia’s “good” relations with Russia, he said national oil company Petronas was set to negotiate with Russia to buy oil and ensure a sufficient supply for domestic use.
Asrul Sani, associate vice-president at strategic advisory firm The Asia Group, said Anwar has visited Russia twice since taking office, reflecting Malaysia’s longstanding posture of pragmatic, non-aligned engagement with major powers.
“Access to Russian oil will still depend on pricing and sanctions constraints. Larger buyers such as China and India dominate Russian export flows. That could limit availability for smaller markets like Malaysia,” he told CNA.
In December 2022, an international coalition of countries - including the United States, Group of Seven (G7