SCF Primorye’s huge blue-red hull entered the port of Vadinar, western Gujarat, India, earlier this month. The 84,000-tonne oil tanker, built in 2009 and flying the Liberian flag, arrived from the port of Ust-Luga, a village in Russia near the Estonian border.
Until 2017, the Vadinar oil refinery was controlled by Essar, the Indian owner of the Stanlow refinery in the port of Ellesmere. Since then, a consortium that includes the sanctioned Russian state oil company Rosneft and commodity trader Trafigura, which owns a 24.5 percent stake, has owned Nayara Energy, which runs the refinery.
The tanker arrived when India increased imports of Russian oil. The Asian nation’s desire to grab Russian oil at a discount of up to 30 percent has undermined efforts by the United States, Europe and the United Kingdom to deplete Vladimir Putin’s military treasury by restricting imports. Russia earned $ 20 billion from oil exports in May, returning to pre-invasion levels. Concerns are now growing that India is being used as a potential back door in Europe for Russian oil supplies, given rising imports.
Prior to the invasion of Ukraine, imports of Russian oil from India were insignificant due to high transportation costs. But recently, Russian oil imports to India have increased. Vadinar’s owner, Nayara, bought Russian oil in March – just before international export restrictions were imposed – after a one-year gap, buying about 1.8 million barrels from Trafigura, Reuters reported.
oil imports from India
However, the volumes that India buys and exports suggest that part of Russia’s refined crude oil may eventually be used at gas stations in Europe. It is unclear where Russian crude oil brought to SCF Primorye’s Vadinar will be used. The owner of Vadinar declined to comment on the shipment or whether it supplies Russian oil to Europe.
In May, India imported about 800,000 barrels of oil a day from Russia in May, and the rating agency Fitch predicted that imports could soon rise to an additional 1 million barrels a day, or 20% of India’s total imports. India, China and the United Arab Emirates have slowed as Russian crude oil imports to the EU fell by 18% in May.
Putin told a BRICS business meeting (Brazil, Russia, India, China and South Africa) this week that “Russian oil supplies to China and India are growing significantly.”
India’s population of 1.4 billion gives reason to look for cheap supplies. But this is a dangerous political game. “India is on a tightrope,” said Alan Gelder, vice president of Wood Mackenzie’s refining, chemicals and oil markets. “If you take too much, you don’t want the West to sanction the rest of your economy.
The Center for Energy and Clean Air Research said the Reliance Industries Jamnagar refinery in Gujarat received 27% of its oil from Russia in May, up from 5% in April. The center said about 20 percent of Jamnagar’s exports went to the Suez Canal, indicating they were heading for Europe or the United States. Shipments were made to France, Italy and the United Kingdom. However, there is no evidence that these shipments include Russian oil.
The United Kingdom is committed to phasing out Russian oil by the end of the year. Britain did not import gasoline before the war, but diesel accounted for 18% of total demand. Although trade in Russian oil remains legal, the stigma associated with it means that some international companies involved in fuel supplies may try to conceal its origin. Some energy companies rushed to cut supplies from Russia, but industry observers said some drivers in the south-east of England were still likely to refuel diesel refined in Russia.
State-owned oil refiners are trying to secure six-month contacts for Russian oil supplies to India, Bloomberg reported this month. The trio of state-owned refineries – Indian Oil Corp., Hindustan Petroleum and Bharat Petroleum – declined to answer questions about whether they import Russian oil or export it to Europe.
Industry sources said tracking Russian oil supplies to Europe through India proved difficult. “You will find that several shipments of crude oil will arrive in port from different countries and will be mixed. Tracking hydrocarbons is generally impossible. “
There are several tactics that shippers use to hide the origins of Russian oil, sources said. From a financial point of view, payment in Chinese currency – and not in the industry standard dollar – is an option. The volume of trade in the yuan-ruble increased by 1067% after the February invasion of Ukraine. The transfer of oil cargo from ship to ship has also increased, suggesting that oil is being transferred from Russian-flagged ships to other ships. An increasing number of vessels are being “eclipsed” by turning off their automatic identification systems as thousands of gallons of black stuff are carried over the waves.
A third, more niche option for hiding Russian transactions is to exclude the use of currency and trade oil directly for other products, such as gold, food or weapons. Iran has previously taken payments from trading partners in gold, not dollars.
“If a country or an oil operator wants to hide the source of crude oil or petroleum products, it can very easily do so,” said Ajay Parmar, an oil market analyst at ICIS.
Sign up for the Business Today daily email or follow the Guardian Business on Twitter at @BusinessDesk
“Indian refineries apparently take significant quantities of ceded Russian crude oil and then re-export a significant portion of the refined product back from the country,” said Shore Capital analyst Craig Howie. “Given the apparent strength of petrol and diesel prices, this is likely to support stable refining margins for Indian downstream players. The trade rationale here, of course, is understandable, but it seems to run counter to the West’s clear goal of hampering Russia’s economy and military machine.
Oleg Ustenko, President Vladimir Zelensky’s chief economic adviser, is more outspoken. He told the Guardian: “We call on countries everywhere to show solidarity with Ukraine by rejecting Russian blood fat. But let us be aware that the British and European energy, shipping and insurance companies that are helping Putin complete this turn to new markets out of sheer greed are complicit in his war crimes.
“European leaders must take their sanctions regimes seriously and ban not only the import of Russian fossil fuels, but also tax their trade heavily, otherwise the ongoing tragedy in Ukraine will continue and even spread.
For Indian Prime Minister Narendra Modi, trade with Russia remains a politically balancing act. As long as the price of oil remains high and there is pressure on pump users, the risk of a Western reaction will be weighed against the price of cheap oil.
Trafigura said he “unconditionally condemns” the war and “has significantly reduced its purchases of Russian crude oil.” The company said it had suspended all trade with Russian organizations ahead of EU sanctions imposed last month. Trafigura said there was no “operational control” of Nayara Energy or Vadinar. Reliance declined to comment.
Add Comment