New Delhi, Feb 11: Indian Oil Corporation (IOC), the nation’s largest oil firm, is buying “clean” Russian crude oil that does not risk running foul of US sanctions, its Chairman Arvindar Singh Sahney said on Tuesday.
India became the second biggest buyer of Russian crude oil since Moscow invaded Ukraine in February 2022, with purchases rising from less than 1 per cent of the total oil imported to almost 40 per cent of the country’s total oil purchases.
The rise was primarily because Russian crude oil was available at a discount to other internationally traded oil due to the price cap and the European nations shunning purchases from Moscow.
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Last month, US slapped new sanctions against Russia’s energy trade. The sanctions targeted Russian oil producers Gazprom Neft and Surgutneftegas as well as 183 vessels that have shipped Russian oil.
Russia used these tankers to ship oil to countries like India and China after the Group of Seven countries in 2022 imposed a USD 60 a barrel price cap on exports by the Kremlin.
This cap, introduced to limit Moscow’s revenues to fund its war in Ukraine, meant that western shipping and insurance services were not available for any oil cargo that was priced more than USD 60 per barrel.
To circumvent that, Russia used the so-called shadow fleet, insured by its own companies. This fleet has now been sanctioned.
On the sidelines of the India Energy Week, Sahney said sanctions will not have any impact or very marginal impact on the crude availability or energy security of the country. Enough supplies are available around the globe to meet the demand.
The US has not sanctioned Rosneft, the primary entity supplying oil to India, he said adding out of the around 600 tankers used by Russia, only 183 have been sanctioned.
Going forward Indian firms will look to contract Russian oil that is “clean” and not attract sanctions. “We buy Russian oil on a delivered basis which means that the supplier makes arrangements for transportation. We have to see that the tankers carrying Russian oil are not sanctioned and have proper insurance because no port will allow any ship without insurance cover,” he said.
Sanctioned Russian tankers will not be allowed to dock at Indian ports, government sources said, adding that the only exception would be for Russian oil cargoes booked during the wind-down period.
Indian firms can seek additional oil from the Middle East and elsewhere in the world in case of any shortage from Russia.
In the worst-case scenario, the Russian crude, which India was getting at a discount, will not be available at a discount, sources said.
In an attempt to restrict funds for Russia’s war machine, The Group of Seven (G7) rich nations, the European Union and Australia put an embargo on Russian crude and introduced a USD 60 per barrel price cap in December 2022.
Over the next 12 months, the price cap and embargo had a significant impact on revenues, and forced Russia to find new markets and ways to transport its oil.
Russia did this by offering deep discounts on its Urals grade crude. This discount last month fell to USD 2-3 per barrel.
In the first year of the sanctions Russia was losing, on an average, 23 per cent of its Urals crude export revenues every month due to the price cap and embargo.
This figure has fallen sharply to a mere monthly average of 9 per cent in the second year of the cap. This is because Russia built a network of ‘shadow’ tankers, which could trade its oil above the cap to new markets in non-sanctioning countries. (PTI)
