New Delhi: Oil refiners in India are sucking up cheap Russian crud. However, there lies a risk as their exports of refined products will eventually attract sanctions from countries which are determined to cut Moscow’s energy out of global markets, Reuters has reported.
Western countries have targeted crude exports from Russia as part of their sanctions which aimed at punishing Moscow for its invasion of Ukraine.
According to data compiled by commodity analysts Kpler, imports of Russian crude by India hit a record high in May and will likely rise again in June.
The report mentioned that India imported 840,645 barrels per day (bpd) of Russian crude in May, up from 388,666 bpd in April and 136,774 bpd in May last year, the data showed.
Imports in June are estimated at 1.05 million bpd which means that Russia's share of India's total imports will rise to just under one quarter. Last year, India’s imports of Russian crude were around 2 per cent.
The domestic refiners are glad to buy heavily discounted Russian crude, which is being offered at up to $40 a barrel below benchmark Brent crude prices.
The European Union (EU) this week announced a ban on seaborne imports from Russia. And together with Germany and Poland, EU committed in ending pipeline imports, about 90 per cent of Russia's exports to the 27-nation bloc will end. Other importers of Russian crude have said they also aim to either end or reduce their purchases, including major buyers of Russia's Pacific exports such as Japan and South Korea.
However, China, the world’s biggest crude importer, and India, the third-largest, have pumped in oxygen to Russian exporters, buying increasing volumes to take advantage of the cheaper price relative to other suppliers.
Risk for Indian refiners
The risk for India's refiners is that buyers of their refined product exports start to target these cargoes, given the possibility that some of the diesel or gasoline was refined out of Russian crude. Overall, it's likely that at some point countries buying and processing Russian crude, and then exporting refined fuels, such as India and possibly China, will find themselves under scrutiny from those governments trying to isolate Russia's energy exports.
There is the risk of secondary sanctions being imposed, but also of measures to make the physical trade more difficult, such as sanctions on ships that have visited Russian ports, bans on insuring Russian crude cargoes, or cargoes of refined products made from Russian oil.