India Fueling refined Russian Oil to the West

India Fueling refined Russian Oil to the West

Following its invasion of Ukraine, Russia had fewer buyers for its Ural crude oil, with some foreign governments and companies deciding to shun its energy exports, and its price started to fall. India & China have become the largest buyers of Russian oil as Western nations restrict its purchases and impose sanctions. At one point earlier this year, Russian Urals crude was more than $30 a barrel cheaper than Brent crude (the global benchmark).

And as major oil-producing nations seek to maintain global prices by controlling output, Russia has been offering its oil at a discount to willing buyers in Asia but China & India have benefitted from cheap Russian Oil.

The Indian government has defended its purchases from Russia, saying it has to source oil from where it is cheapest. The US government had been critical of these purchases, although it's now made clear that it accepts that India can continue to buy discounted Russian oil. India’s 1.4 billion-strong population gives it reason to seek cheap supplies.

With the G7 price cap plan - to keep Russian exports at or below $60 a barrel - now in force, lax enforcement of the price cap may rule it ineffective. But experts also point out that a total ban on Russian oil could have led to further market instability and possible oil price rises (from which Moscow could benefit). It's not yet clear what impact the price cap might have on countries like India and China that are already buying Russian oil at a discount.

Although the price of Russian crude oil is attractive, India's refineries have faced a challenge trying to finance purchases, because sanctions on Russian banks are affecting payment transactions. One of the options India considered was a system based on local currencies, where Indian exporters to Russia get paid in Russian Rubles instead of US dollars or euros and imports are paid for in Indian Rupees.

The Asian nation’s willingness to snap up Russian crude at discounts of up to 30% has undermined efforts from the US, Europe and the UK to deplete Vladimir Putin’s war coffers by curtailing imports.

There is a 600,000 barrels diesel shortage per day in Europe right now, which will only exacerbate this year. Do you know who is going to be the major supplier to plug this gap? India is going to fulfill this by more than 60%! This is a huge game-changer in geopolitics India is emerging as the upstream refinery destination of Russian oil, which is then exported to Europe

Indian private refiners may gain from EU's ban on Russian oil products

Indian refiners can process cheap Russian crude into products, and export to Europe. When Russian crude is processed into fuels in a country outside of the bloc such as India, the refined products can be delivered into the EU because they’re not deemed to be of Russian origin. The volumes that India has been buying and exporting, however, suggest that some of the refined Russian crude may ultimately be used in Europe’s filling stations. Industry sources said tracking shipments of Russian oil to Europe via India is proving very difficult. There are several tactics shippers are using to hide the origin of Russian oil. Transfers of oil cargoes from ship-to-ship have also spiked, suggesting oil is being switched from Russian flagged-vessels to other ships. Increasing numbers of vessels have been “going dark” by switching off their automative identification systems as thousands of gallons of the black stuff are transferred on the waves. A third, more niche option to hide Russian transactions is to cut out using a currency and trade oil directly for other products, such as gold, food or weapons. Indian refiners are clearly taking significant volumes of discounted Russian crude and then re-exporting a material proportion of refined product back out of the country. Given the obvious strength of petrol and diesel prices, this presumably supports robust refining margins for Indian downstream players. The commercial rationale here is of course understandable, but does seem to run contrary to the west’s clear objective to hamper the Russian economy and war machine.

India is a net exporter of refined product and much of this will be going to the West to help ease current tightness.

The stigma attached to the trade means some international companies involved in fuel supplies may attempt to mask its origins. Some energy firms rushed to cut shipments from Russia but industry watchers said some drivers in the south-east of England were still likely to still be filling up with diesel refined in Russia.

Not only will this have a positive impact on India's Current account, but also we will emerge as a major player in global energy economics US simply cannot tolerate the rise of India in energy geo-economics, (especially built on partnership with Russia). ?This is why all these attacks are happening; they have moved beyond "human rights" & "religious freedom" to wild documentaries & attacking Indian businesses as recent attach orchestrated by Soros inspired FII’s short selling of Adani Group stocks.

What threatens US the most is the next step, when India joins other BRICS nations to implement the “mBridge platform” for international hydrocarbon trade that will be a death knell for the dollar and the exorbitant privilege that US enjoys.

Yet New Delhi has faced little public blowback because it’s meeting the West’s twin goals of crimping Moscow’s energy revenue while preventing an oil supply shock. And as Europe ramps us sanctions, India is only going to become more central to a global oil map that’s been redrawn by Vladimir Putin’s year-long war in Ukraine.