Russia’s crude oil exports to India collapsed to below 1 million b/d for the first time in 13 months during November, according to preliminary tanker tracking data, amid rising freight rates, tighter sanctions compliance and a reported dispute over rupee payments for Moscow’s crude from its biggest buyer.
India overtook China to become Russia’s biggest buyer of seaborne crude last year with flows peaking at almost 2 million b/d in May as Indian refiners snapped up discounted Russian oil. However, Russia’s monthly exports to India have averaged just 892,000 b/d in November, a 47% slide on the month and down from an average of 1.53 million b/d this year, according to S&P Global Commodities at Sea.
The sharply lower flows to India come amid shrinking discounts for Russian crude arriving at Indian ports as Russia sources more non-G7 shipping capacity to sidestep the G7’s $60/b price cap on its exports and as values for medium sour crudes continue to strengthen globally on the back of OPEC+ production cuts.
Although Urals FOB values have weakened against Dated Brent recently, the discount for cargoes arriving on India’s west coast remains at $4.10/b, the tightest differential since Platts, part of S&P Global Commodity Insights, began evaluating the assessment in January.
The lump sum value for 100,000 mt cargoes from both the Baltics and Black Sea bound for India has now jumped to between $8.7 million and $9.25 million, according to sources familiar with the subject. This compares with around $4.2 million for the same journey in early October.
Speaking in October, the chairperson for Indian Oil Corp. said the state-run refining company is shifting to other crude sources to feed its refineries as the steep discounts for Russian crude available over the past year and half have dwindled.
Freight costs initially increased on the back of a tight tonnage list and low availability of dirty tankers, and recent moves by the US and the UK to crack down on sanctions busting in the shipping sector and EU plans to tighten compliance rules for transporting crude have further raised freight costs, traders said.
Some major tanker operators that need to comply with the G7 price cap regime have exited the Russian trade, with the West focus on tightening enforcement. Three top Greek tanker operators have stopped transporting Russian oil in recent weeks to avoid sanctions now being imposed on some shipping companies carrying Russian oil, Reuters reported Nov. 24, citing unnamed traders and data.
Minerva Marine, Thenamaris Ship Management and TMS Tankers carried 607,666 b/d in November to date, 30% lower than the 868,137 b/d average in the third quarter, CAS data showed.
Rupee payments
The collapse in India’s imports of Russian crude also comes amid reports that Russia’s central bank no longer wishes to accept payments in rupees for oil exports, a compromise deal agreed earlier this year under Russian efforts to avoid trade in dollars due to Western sanctions. Citing unnamed Russian banking sources, Reuters reported on Nov. 27 that the Russian central bank said receiving revenue in a non-convertible currency with little value outside India was “pointless”.
India’s Russian oil imports are currently being paid for in a combination of the Chinese yuan, the Hong-Kong dollar as a transition currency into the yuan and the UAE dirham as a temporary solution to the currently issue, according to the report.
Rosneft’s CEO Igor Sechin said Nov. 30 that a lack of central bank support for cross-border payments are part of measures hampering its efforts to overcome the pressure of international sanctions.
“From the start of the strengthening of sanctions, the Bank of Russia hasn’t created reliable routes for the execution of cross-border payments in different currencies, which complicates the timely settlement of export earnings,” Sechin said in a third-quarter results statement for state-run Rosneft.
The Russian central bank did not immediately respond to a request for comment in relation to cross-border payments.
Indian government officials have been tight-lipped on their currency payments for Russian oil.
Russian foreign minister Sergey Lavrov in September reiterated concerns that Moscow is accumulating billions of rupees in Indian banks for oil payments which is it unable to access. He also said India had offer Russia options to invest the rupees it has accumulated for exports.
Noting Russia’s widening trade deficit with India, Lavrov said in May that Russia was in discussions with India to convert the rupees into other currencies.
“As for rupees, this is a problem because there are billions of rupees accumulated in accounts at Indian banks and we need to use this money,” Lavrov told reporters at the time.
Source: Platts
