Buy, Refine, Ship: How India Sells Russian Oil in Europe

At the end of the year, Russia loses its largest oil customer with the EU. A replacement seems to have already been found: countries like India are stocking up on cheap oil. Officially for domestic supply, but with a veiled origin, it ends up in the EU and USA despite sanctions.

The gas deliveries Germany and other EU countries has meanwhile been significantly reduced by Russia. By the end of the year, Ukraine’s European partners must also follow suit Alternatives to Russian oil look around if they want to implement their embargo. And Russia needs new buyers in other parts of the world.

But they seem to have been found: South Africa considering buying cheap Russian oil to combat rising fuel prices. and China imported more oil from Russia in May than ever before. According to the Chinese customs authorities, almost two million barrels arrived in the People’s Republic every day.

India is also happy about the cheap offer. As recently as January and February, Indian refineries weren’t importing any oil from Russia at all, but in May it was suddenly all over the place 819,000 barrels per day – and at a bargain price: Western companies have avoided Russian oil since the beginning of the war, oil giants like Rosneft only get rid of their barrels if they Offer discounts of up to 30 percent.

Big Indian energy hunger

One reason why India didn’t buy any Russian oil just a few months ago was the high transport costs. As a rule, it is loaded onto tankers near St. Petersburg. From there it goes via the Baltic Sea, North Sea and Mediterranean Sea around the EU to the Suez Canal and past the Arabian Peninsula. In the Gulf of Karachi, the tankers dock on the west coast of India. A trip takes about 40 days.

But that was once: By the end of May, India is said to have bought a total of 62.5 million barrels of Russian oil. The interest comes as no surprise, the subcontinent is second only to the US and China third largest oil consumer in the world. The imports are important to ensure security of supply, defended the government in New Delhi the imports. In addition, they import less oil in a month than Europe does in an afternoon.

Russian oil, but “Indian” gasoline

According to data from Reuters about half of the oil in the large refineries of the industrial group reliance or oil company Nayara Energy, which is 50% owned by Russian giant Rosneft. However, they are only intended to partially satisfy India’s thirst for oil: Apparently the Russian discounts are so lucrative that they prefer to sell the oil on. This accusation is made, among others, by the Finland-based Center for Research into Energy and Clean Air (CREA – Center for Research on Energy and Clean Air).

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Energy experts have been observing how since the beginning of the war Energy exports finance the Russian attack on Ukraine. In their analysis, they found that Reliance or Nayara Energy ship more than half of their imports abroad as supposedly “Indian” gasoline or diesel after the crude oil has been processed in their refineries. According to this, every fifth tanker heads for the Suez Canal. This suggests that the customers are located in Europe or North America. According to their own statements, researchers in Helsinki have already been able to prove deliveries to France, Italy, Great Britain and the USA.

“Earn with every barrel”

Analysis company data Kplerwhich analyzes the world market for raw materials, indicate that the allegation is correct: According to this, Indian refineries exported 15 percent more fuel abroad in the first five months of the year than in the same period last year, as stated in a report by Reuters called. The reporters quote a senior executive at an Indian refinery: “We make more than $30 for every barrel of oil that we process and sell abroad for fuel.”

The fact that Russian oil flows via India to Europe is actually forbidden. However, the hands of the EU, the USA and their allies are tied, so to speak: the Indian government is taking part in the conflict neutral stance one, the sanctions are not supported. And to prove that in the tankers of Reliance, Nayara and other fuel products from Russia are difficult.

Greece vetoes

But the system has a weak point, as the energy experts from Finland report: significantly more tankers are needed for the long transport routes from Russia to India and back to Europe than for the previous Russia-Europe business – and most of them are in Western hands. In April and May, about two-thirds (67 percent) of Russian oil was shipped by tankers registered in Europe or the US. Three out of four deliveries to India or the Middle East were even made by Greek ships: Greek shipowners operate them world’s largest tanker fleet.

A monopoly that the EU could exploit – at least in theory. In May, the heads of state and government decided to ban imports of Russian oil by sea. They also wanted to ban ships flying the European flag or ships registered in the EU from transporting Russian oil.

However, EU sanctions must be decided unanimously. As the ARD reports, the Greek government has vetoed it because its shipowners make a lot of money from the transport of Russian oil and a ban would endanger many jobs. It looks like Greek tankers can play the role of oil middleman for Russia and India in the future.

The heart of shipping insurers

However, another sanction lever that Greece does not control gives hope: European companies are allowed no longer insure tankers transporting Russian oil to third countries transport. However, these insurance policies are important for shipowners because they can use them to protect against damage to the ship and cargo. Most importantly, they are mandatory in almost all coastal nations to cover the costs of collisions or oil spills.

Luckily for the EU, most shipping insurers are based in Europe: 97 percent of all tankersTransporting Russian oil are insured in the UK, Norway and Sweden, according to energy analysts in Helsinki. The heart of the industry beats at the London company Lloyd’s. And like them “Financial Times” reports that the EU and Great Britain are working together on the insurance ban despite Brexit.

Are Asian insurers stepping in?

At first glance, the regulation is a hit. Without insurance, ships with Russian oil on board run a high financial risk if they are even allowed to call at their destination port. Nevertheless, some experts doubt the effectiveness of the ban.

Because it has to be proven that Russian oil is actually being transported. This requirement is already crumbling, as Indian deliveries to Europe and the USA show. And it will continue to crumble as more and more tankers disguise their origins by turning off their GPS signals and offloading the oil to another ship at sea – bypassing it Iran, North Korea and Venezuela have had Western oil sanctions for years.

There are also shipping insurers outside of Europe, as Jan Blumenthal, head of Lloyd’s Germany, explains. The insurance ban will not prevent the Russian president from getting rid of his oil, Blumenthal says in the ARD. “He will sell his oil on Asian markets. Accordingly, the transport on Asian markets will be insured by Asian insurers.”

“Not an attractive offer”

However, other experts believe these concerns are exaggerated. They point out that Chinese technology companies are also retreating for fear of secondary sanctions comply with the technology sanctions against Russia, although they don’t have to. According to this, international insurers find themselves in the same situation: Do they want to give up possible business in Europe or in the USA in order to be able to insure Russian oil transports?

The same also applies to the shipowners, explains a consulting firm from the shipping industry in one “politico”Article: Would you really risk 60 million barrels of oil on the international market to ship 2 million from Russia? The answer from an industry expert is clear: “I don’t think that’s an attractive offer.”

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