India, the world’s third-largest oil importer and consumer, expects no disruption to Russian oil supplies in the next two months but its refineries may avoid deliveries by US-mandated tankers in the latest round, a senior government source said on Monday.
The US on Friday announced the lifting of sanctions against Russia’s energy trade. The sanctions target Russian oil producers Gazprom Neft and Surgutneftegas and 183 vessels that shipped Russian oil.
Russia used these tanks to export oil to countries such as India and China after the Group of Seven countries in 2022 set a price of $ 60 per barrel for the Kremlin’s exports.
The decision, introduced to limit Moscow’s revenue to finance its war in Ukraine, meant that western shipping and insurance services were not available for any oil that was priced above $60 per barrel.
To avoid that, Russia used the so-called shadow fleet, which was insured by its companies. These vessels are now certified.
The source said there is a blackout period until March 12, which will allow existing contracts to expire.
“In the first two months, there will be no disruptions. In two months, we will probably see new plans for oil coming to India,” said the source.
Condemned Russian tankers will not be allowed to dock at Indian ports, the source said, adding that only Russian oil tankers booked before January 10 will be left, as long as they are unloaded by March 12.
“The market is waiting for Russia to respond to the sanctions,” he said. “Russia will find ways to reach us.”
One way would be for Russia to offer deep discounts on crude exports to India to meet the $60 a barrel price for further exports.
India has become the second largest buyer of Russian crude oil since Moscow invaded Ukraine in February 2022, with purchases rising from less than 1 percent of all oil imports to nearly 40 percent of the country’s oil imports.
The increase was due to Russian crude oil being available at a discount to other world oil traders due to falling prices and European countries avoiding buying from Moscow.
The sanctions sent global oil prices above $81 a barrel on Monday, the highest since August, with expected disruptions to Russian oil supplies to China and India.
“The price increase is a knee-jerk reaction,” the source said, adding that Brent will fall below $80 because there is no supply shortage.
Indian firms may seek more oil from the Middle East and elsewhere in the world in case of any shortage from Russia.
“In the next two months, we don’t expect a big problem because the ships that are already on their way will come to us,” he said.
He said a few things haven’t changed — the $60 price tag hasn’t changed. Also, the property must be accounted for and insurance must be paid.
“What has changed is that two organizations have been approved. What has changed is that one Russian insurance company has been approved,” he said.
“Out of the two authorized organizations, one was not the biggest seller in India. The other was not big but it was important.
There are other suppliers from Russia and elsewhere who are traders, who have not yet been approved.”
The source said the impact of the US sanctions will be less visible.
In the worst case scenario, Russian crude, which India used to get at a discount, will not be available at a discount, he added.
In an attempt to limit the money of the Russian war machine, the Group of Seven (G7) wealthy nations, the European Union and Australia put a ban on Russian crude and introduced a total price of $60 per barrel in December 2022.
Over the next 12 months, the tariff and embargo had a significant impact on revenues, and forced Russia to find new markets and ways to transport its oil.
Russia has done this by offering deep discounts on its Urals range crude.
In the first year of the sanctions Russia was losing, on average, 23 percent of the Urals’ crude export revenue every month due to the tariff and the embargo.
This figure dropped significantly to a monthly average of 9 percent in the second year of the cap.
This is because Russia is building a network of ‘shadow’ tankers, which can trade its oil above average to new markets in forbidden countries.
