IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/26024.html

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

Author

Listed:
  • Tadashi ITO
  • Kiyoyasu TANAKA

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.

Suggested Citation

  • Tadashi ITO & Kiyoyasu TANAKA, 2026. "Oil Laundering: How did Russian oil circumvent the European Union’s embargo?," Discussion papers 26024, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:26024
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/26e024.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Johnson, Simon & Rachel, Lukasz & Wolfram, Catherine, 2023. "Design and implementation of the price cap on Russian oil exports," Journal of Comparative Economics, Elsevier, vol. 51(4), pages 1244-1252.
    2. Peter Egger & Constantinos Syropoulos & Yoto V. Yotov, 2024. "Analyzing the effects of economic sanctions: Recent theory, data, and quantification," Review of International Economics, Wiley Blackwell, vol. 32(1), pages 1-11, February.
    3. Oleg Itskhoki & Elina Ribakova, 2024. "The Economics of Sanctions: From Theory into Practice," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 55(2 (Fall)), pages 425-497.
    4. Jesús Fernández-Villaverde & Yiliang Li & Le Xu & Francesco Zanetti, 2025. "Charting the Uncharted: The (Un)Intended Consequences of Oil Sanctions and Dark Shipping," CESifo Working Paper Series 11684, CESifo.
    5. Babina, Tania & Hilgenstock, Benjamin & Itskhoki, Oleg & Mironov, Maxim & Ribakova, Elina & Shapoval, Nataliia, 2026. "Russian oil exports under international sanctions," Energy Economics, Elsevier, vol. 153(C).
    6. Peter Öhlinger & Michael Irlacher & Jochen Güntner, 2024. "Not all oil types are alike in trade substitution," Nature Communications, Nature, vol. 15(1), pages 1-12, December.
    7. Lutz Kilian & David Rapson & Burkhard Schipper, 2026. "The Impact of the 2022 Oil Embargo and Price Cap on Russian Oil Prices," The Energy Journal, , vol. 47(3), pages 1-39, May.
    8. T. Clifton Morgan & Constantinos Syropoulos & Yoto V. Yotov, 2023. "Economic Sanctions: Evolution, Consequences, and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 37(1), pages 3-30, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhou, Jiaxin & Wang, Shihao & Duan, Haipeng, 2025. "The impact of trade sanctions on financial risk: Empirical evidence from global data," Pacific-Basin Finance Journal, Elsevier, vol. 94(C).
    2. Konstantin Egorov & Vasily Korovkin & Alexey Makarin & Dzhamilya Nigmatulina, 2025. "Trade Sanctions," CESifo Working Paper Series 12341, CESifo.
      • Egorov, Konstantin & Korovkin, Vasily & Makarin, Alexey & Nigmatulina, Dzhamilya, 2025. "Trade sanctions," BOFIT Discussion Papers 11/2025, Bank of Finland Institute for Emerging Economies (BOFIT).
      • Konstantin Egorov & Vasily Korovkin & Alexey Makarin & Dzhamilya Nigmatulina, 2025. "Trade Sanctions," Working Papers 1516, Barcelona School of Economics.
      • Konstantin Egorov & Vasily Korovkin & Alexey Makarin & Dzhamilya Nigmatulina, 2025. "Trade sanctions," Economics Working Papers 1920, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Jerg Gutmann & Matthias Neuenkirch & Florian Neumeier, 2024. "Political Economy of International Sanctions," Research Papers in Economics 2024-07, University of Trier, Department of Economics.
    4. Stephen W. Salant & Diego S. Cardoso & Julien Xavier Daubanes, 2026. "The Price Ceiling that Minimizes an Exporter’s Profits Without Raising the Buyers’ Price Excessively," CESifo Working Paper Series 12608, CESifo.
    5. Djankov, Simeon & Su, Meng, 2024. "Are U.S. sanctions off-target: Evidence from the Magnitsky act," Economics Letters, Elsevier, vol. 242(C).
    6. Drapkin, I. & Simachev, Yu. & Fedyunina, A. & Pastukhova, P., 2025. "The impact of financial sanctions on countries' participation in global value chains: An assessment with the synthetic control method," Journal of the New Economic Association, New Economic Association, vol. 69(4), pages 151-172.
    7. Yang Ye & Qingpeng Zhang, 2024. "The futility of economic sanctions in a globalized and interdependent world: a data-driven game theoretical study," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.
    8. Chen, Mo & Xue, Wei-Xian & Zhao, Xin-Xin & Chang, Chun-Ping & Liu, Xiaoxia, 2024. "The impact of economic sanctions on the COVID-19 pandemic," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 163-174.
    9. Görg, Holger & Jacobs, Anna & Meuchelböck, Saskia, 2024. "Who is to suffer? Quantifying the impact of sanctions on German firms," Journal of Economic Behavior & Organization, Elsevier, vol. 228(C).
    10. Gorodnichenko, Yuriy & Vasudevan, Vittal, 2025. "Macroeconomic Expectations in a War," CEPR Discussion Papers 20462, Centre for Economic Policy Research.
    11. Dominika Langenmayr & Mikayel Tovmasyan & Sebastian Vosseler, 2025. "Bypassing Sanctions: Hide 'N Seek in Tax Havens?," Working Papers 202536, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    12. Funke, Michael & Wende, Adrian, 2025. "The limited effectiveness of sanctions on Russia: Modeling loopholes and workarounds," BOFIT Discussion Papers 4/2025, Bank of Finland Institute for Emerging Economies (BOFIT).
    13. Makoto Fukumoto, 2025. "Who Traded Away Democracy? Business-Backed Legislators during the Democratic Backsliding in Japan 1936-1942," Working Papers 2504, Waseda University, Faculty of Political Science and Economics.
    14. Almutairi, Hossa & Pierru, Axel & Smith, James L., 2025. "Pandemic, Ukraine, OPEC+ and strategic stockpiles: Taming the oil market in turbulent times," Energy Economics, Elsevier, vol. 144(C).
    15. Felbermayr Gabriel & Janeba Eckhard, 2024. "Improving Supply Security: Guidelines and Policy Proposals," Intereconomics: Review of European Economic Policy, Sciendo, vol. 59(3), pages 146-153.
    16. Barnard, Helena & Luiz, John M., 2024. "The South African economic elite and ownership changes in foreign multinationals’ assets during and after Apartheid-era sanctions," Journal of World Business, Elsevier, vol. 59(5).
    17. Juan de Lucio & Raúl Mínguez & Asier Minondo & Francisco Requena, 2024. "Reducing trade with Russia: Sanctions vs. reputation," Working Papers 2406, Department of Applied Economics II, Universidad de Valencia.
    18. Kai A. Konrad & Marcel Thum, 2025. "Closing Multiple Sanction Loopholes," Working Papers tax-mpg-rps-2025-07, Max Planck Institute for Tax Law and Public Finance.
    19. Funke, Michael & Wende, Adrian, 2025. "The Limited Effectiveness of Sanctions on Russia: Modeling Loopholes and Workarounds," VfS Annual Conference 2025 (Cologne): Revival of Industrial Policy 325396, Verein für Socialpolitik / German Economic Association.
    20. Gabriel Felbermayr & Constantinos Syropoulos & Erdal Yalcin & Yoto V. Yotov, 2025. "On the heterogeneous effects of sanctions on trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(1), pages 247-280, February.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:26024. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.