TNI || New Delhi || 18th 2022
The European Union’s growing clamour for a ban on Russian oil imports may be ignoring a critical flaw in its plot to punish Moscow.
India is rapidly growing as a major customer of Russian oil, scooping up crude cargoes that European importers are unwilling to accept.
India is already prospering from supplying diesel to Europe, with some European governments and oil companies self-sanctioning Russian imports and starving themselves of fuel.
Prices will undoubtedly rise if Europe imposes official restrictions on Russian crude and fuel, and India might earn even more by refining Russian oil into fuels that it then sells to Europe for a higher price.
It’s a narrative twist that symbolises the EU’s difficulty in untangling itself from Russian energy imports.
Despite the EU’s best attempts to wean itself off oil and gas, India may continue to benefit by supplying Russian crude-based fuel to an energy-starved Europe.
This would weaken the case of certain EU countries that want to penalise Russia by refusing to support its energy sales.
That is the price of sanctions, or rather, self-sanctioning, Turner, Mason & Co. oil analyst Jonathan Leitch said.
Shipping Urals-grade Russian crude to India and then refining it before selling it to Europe adds a lot of needless tonne/miles and earns the Indian refiners a larger profit, resulting in a higher retail price for the customer.
Indian refiners—both state-run and private—have increased their processing of Russian barrels since last month, and the volumes will continue to rise as more shipments begin turning up this month and next after processors vigorously buy cargoes shunned by others.
As per Jane Xie, a senior oil analyst at the data and analytics company Kpler in Singapore, India’s diesel exports in March were the biggest since April 2020, when they topped 847,000 barrels per day.
About 30% has ended up in Europe, where ultra-low sulphur fuel is $100 per tonne more expensive than it was in Singapore last month.
State-run refiners such as Indian Oil Corp. as well as Bharat Petroleum Corp. have begun importing Russia’s premier Urals grade and its Sokol crude.
While the refiners mostly sell in their own country, they have started exporting more to take advantage of higher prices around the world. India’s Nayara Energy Ltd., which is sponsored by Russian oil company Rosneft PJSC, has also purchased Russian crude.
Nayara Energy said that, like any other facility, they optimise their crude basket with the goal of achieving the optimum choice for their refinery.
Feedstock is procured through long-term contracts and spot deals. At the same time, they are boosting product sales through the right channels.
India has an advantage over other Asia-Pacific refiners because of its proximity to European markets.
A trip from Jamnagar to Rotterdam, according to Xie, would take roughly 22 days, whereas a trip from Ulsan, South Korea, to Rotterdam is likely to take about 38 days.
India has resisted Western pressure to cut ties with Moscow, claiming that it has to keep buying cheap Russian oil to preserve its own interests.
While Indian enterprises’ purchases of Russian oil account for a small portion of the overall amount imported from abroad, the low prices offered by state-run Russian companies could be a windfall.
For Indian refiners, such purchases would make imports even more appealing than spot purchases from merchants.