Western sanctions on Russia have significantly reduced state oil revenues and diverted tens of billions of dollars towards shipping and refining firms, some with Russian connections.
Most of the winners from the sanctions are based in China, India, Greece and the United Arab Emirates, at least 20 trading and banking sources said. A handful are partly owned by Russian companies.
None of the firms is breaching sanctions, the sources told Reuters, but they have benefited from measures designed by the European Union and the United States to reduce the revenues of what they call Russian President Vladimir Putin's war machine.
As the Ukraine conflict heads into a second year, the calculations show that Russia's income has dropped but the volume of exports has remained relatively stable despite sanctions.
Putin told the West that sanctions would trigger an energy price rally. Instead, international benchmark Brent oil prices have fallen to $80 per barrel from a near-all-time high of $139 in March 2022, weeks after the start of the war.
Before Moscow's invasion of Ukraine began on Feb 24 last year, Brent traded at around $65-$85 per barrel.
After the Group of Seven (G7) industrialised nations imposed a price cap on Russian oil in December, Moscow's oil export revenues fell by 40% year-on-year in January, Russia's finance ministry said.
"Low official oil price meant that the Russian state budget has suffered in recent weeks," Sergey Vakulenko, non-resident fellow at the Carnegie Endowment for International Peace, said.
Vakulenko was a former head of strategy at Russian energy major Gazprom Neft. He left the firm and Russia days after the start of the war.
"Judging by the customs statistics, some of the benefit was captured by refiners in India and China, but the main beneficiaries must be oil shippers, intermediaries and the Russian oil companies," he added.
Sanctions on Russia - probably the harshest imposed on an individual state - include outright bans on purchases of Russian energy by the United States and the EU, as well as bans on the shipping of Russian crude anywhere in the world unless it is sold at or below $60 per barrel.
Russian state oil revenues fall 40% on sanctions
Tanker owners post record profits, traders and bankers say
India, China get cheaper oil
Russia has diverted most crude and refined products to Asia by offering steep discounts to buyers in China and India versus competing grades from the Middle East, for instance.
The ban on shipping and the price cap have made buyers wary and forced Russia to pay for transportation of crude as it does not have enough tankers to carry all of its exports.
As of late January, Russian oil firms were offering discounts of $15-$20 per barrel for crude to buyers in India and China, according to at least 10 of the traders who are involved in operations and an invoice seen by Reuters. All of the sources asked not to be named because of the sensitivity of the issue.
In addition, Russian sellers have also paid $15-$20 per barrel to shipping companies to take crude from Russia to China or India, according to the 10 traders and the invoice.
As a result, Russian companies received only $49.48 per barrel of Urals at Russian ports in January, down 42% year-on-year and just 60% of the European Brent benchmark price, according to the Russian Finance Ministry.
By comparison, a US exporter of Mars crude - a grade similar to Urals - would pay about $5-$7 per barrel for shipping a cargo to India. Given a discount of $1.6 per barrel versus the US benchmark WTI, a US exporter would collect some $66 per barrel at a US port, or 90% of the benchmark price.
With output of 10.7 million barrels per day (bpd) in 2022 and exports of crude and refined products of 7.0 million bpd, the discount and additional costs would see producers' revenues falling by tens of billions of dollars in 2023.
The head of the International Energy Agency (IEA), Fatih Birol, said on Sunday the price cap reduced Moscow's revenue by $8 billion in January alone.
However, because some lost revenues are captured by Russian firms, the exact hit to earnings of producers and the state is difficult to quantify.
As a further complication, some Russian oil grades, including Pacific grade ESPO, are also worth more than Urals.
The Russian energy and finance ministries declined to comment on the impact.
'CRAZY GOOD' SHIPPING BONANZA
Lower revenues have coincided with higher profits for some intermediaries, experts including Vakulenko and traders in Russian oil say.
After decades of low profits or losses, sections of the global shipping industry are enjoying a financial boom from moving Russian oil.
Those companies include Russian state shipper Sovcomflot, led by Putin's ally Sergei Frank, and Greek shipping firms TMS Tankers Management, Stealth Maritime, Kyklades Maritime, Dynacom, Delta Tankers, NGM Energy and New Shipping.
Some Greek and Norwegian tanker owners sold their old ships at record prices to shipping firms such as Fractal Shipping, with owners in Dubai.
Saudi Arabia and the UAE have refused to condemn Russia's war in Ukraine and have broadened cooperation with Moscow despite Washington's pressure.
All shipping companies declined to comment on any profits they make from Russian oil.
The invoice seen by Reuters showed a shipper charged a Russian crude seller close to $10.5 million for one voyage to take a regular-size Aframax tanker with 700,000 barrels on board from a Baltic port to an Indian refinery in January.
A year ago, a similar journey would have cost a seller of Russian oil $0.5-$1.0 million depending on shipping rates.
For the shipper, the running cost of such a voyage in today's market ranges between $0.5-$1.0 million, meaning the shipper's net profit from a single voyage could be $10 million.
A trader in Russian crude described tanker business as "crazy good".
While tanker owners charge record high rates for Russian crude shipments, refiners in India and China have also benefited from big discounts.
India's Russian oil imports hit an all-time high of above 1.25 million bpd in recent weeks, meaning the country has saved over $500 million a month on its oil bill with Russian oil sold at a discount of around $15 per barrel.
Leading Indian importers - IOC, HPCL, BPCL, Nayara and Reliance - declined to comment on discounts and profits.
Nayara is 49%-owned by Russian state oil major Rosneft, run by Putin's ally Igor Sechin, meaning some of the profits are indirectly captured by Russia. Rosneft declined to comment on its role in Nayara and how it could recover some profits.
China imported over 1.8 million bpd of Russian oil between April 2022 and January 2023, Emma Li, China analyst at Vortexa Analytics, said.
Based on an estimated $10 a barrel discount for both ESPO and Urals crude on delivered basis, that saved Chinese refiners about $5.5 billion over the 10-month period, according to Reuters' calculations.
Independent refiners in the eastern province of Shandong were the biggest beneficiaries. State refining giant Sinopec Corp also gained from the cheaper oil, and state-run Petrochina, Zhenhua Oil and CNOOC made profits from trading the barrels, traders said.
All the companies, as well as Shandong provincial government did not respond to request for comment.