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India Seeks Alternatives To Russian Oil
Following Russia’s invasion of Ukraine in 2022, India emerged as a major buyer of Russian oil that was widely and rapidly sanctioned by the West. However, all that may be about to change, courtesy of a fresh wave of U.S. sanctions on Russia and India’s own scramble to find alternatives.
Such a shift is unlikely to be quite as simple or swift. India’s imports from Russia currently make up for a remarkable 40% of its total oil purchases on the global market, up fourfold from around 10% in 2021 – the year before hostilities began in Ukraine.
A noticeable jump in the flow of Russian oil to India happened in the second half of 2022. That’s when the U.S. and its allies slapped a price cap of around $60 per barrel for cargoes of Russian crude to access Western services needed for shipping, including insurance and tankers.
While the idea was to limit both Russian crude volumes on the global market as well as earnings from the sale of oil, India headed the pack of buyers that took advantage of the bind Moscow found itself in.
Gradually, a monthly oil trading partnership between Delhi and Moscow worth nearly $3 billion or 1.85 to 1.95 million barrels per day took shape, according to the Centre for Research on Energy and Clean Air (CREA).
Much of the oil was delivered via fleets of dark or ‘shadow’ tankers, i.e. tankers with unclear ownership structures created through various entities that make it difficult to pin down who actually owns or controls them, as well as compel them to follow Western sanctions.
Last year, CREA noted that: “81% of the total value of Russian seaborne crude oil was transported by ‘shadow’ tankers, while tankers owned or insured in countries implementing the price cap accounted for 19%.
“Russia’s reliance on tankers that are owned or insured in G7 countries has fallen due to the growth of ‘shadow’ tankers. This subsequently impacts the coalition’s leverage to lower the price cap and hit Russia’s oil export revenues.”
But on January 10, the U.S. announced a fresh wave of sanctions to target such tankers carrying Russian oil, along with maritime insurance providers based in the country.
In a statement, the U.S. Treasury said it was imposing further sanctions on Russian oil and gas exploration and production firms Gazprom Neft and Surgutneftegas, networks that trade Russian oil and 183 vessels that may have shipped such cargoes.
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