US sanctions on Russia to have little impact on India’s Ural cargoes
Even as sanctions on Russian tankers forced India to stop procuring spot crude oil from the latter “for now”, refiners and analysts expect the disruptions to have little impact on supply of the medium sour grade Urals.
Russia’s flagship crude oil grade accounts for more than half of India’s cumulative imports from the country. Other grades include ESPO, Varandey and Sokol.
A top oil sector executive said refiners are “cautious” and are following the sanctions. Procurements are “not happening for now” and most are shying away from buying Russian spot crude post January 10, 2024, the day Russian entities were slapped with sanctions.
“Its temporary. They have around 600 tankers, of which 183 have been sanctioned. Majority were running supplies from North and East Russia. Impact is lower on the Black sea side, but issues like insurance need to be handled by them. Russia will find alternatives,” the official added.
The US Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on Russian crude oil producers Gazprom Neft and Surgutneftegas as well as 183 ships, including an icebreaker, involved in transport and logistics.
Temporary situation
Of the 183 sanctioned tankers, around 54 for ferrying oil and produce, and four liquefied natural gas (LNG) tankers are owned by Sovcomflot, Russia’s state-owned shipping company. Another nine crude and product carriers are operated by Rosnefteflot, the shipping arm of Rosneft.
State-run Indian Oil Corporation (IoCL), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) in their Q3 FY25 investor call have also said that the situation is temporary, and Russia will work out alternatives. Besides, there is no shortage of supplies in the international market.
Andon Pavlov, Senior Manager Downstream Analysis at Kpler, said that for India, the recent US sanctions on tankers carrying Russian crude oil will probably not be phased out.
“However, it is worth noting that most of these tankers have been involved in carrying ESPO blend, mainly into China, rather than trade with India, so our current expectations are that not much is going to change for Indian energy flows in the next couple of months, aside from a readjustment to slightly higher flows from the Middle East,” he told businessline.
A senior government official said that currently, refiners are only looking for “clean, or non-sanctioned” Russian crude oil. However, logistics, insurance, etc has to be worked out, for which discussions are constantly on. This is not just with Indian refiners, but others are also following the “cautious” approach.
Tanker troubles
Trade sources said the US sanctions are expected to impact around 15 per cent of Russia’s cumulative exports. As per the International Energy Agency (IEA) Russian oil exports stood at 7.33 million barrels per day (mb/d) in December 2024.
However, lower tanker availability can jack up freight rates making the barrels costly, which will impact the oil marketing companies (OMCs) margins.
Currently, Russia accounts for 25 per cent of the total cargoes procured by Indian Oil Corporation (IoCL), while for Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (BPCL) it is 30-35 per cent.
The three state-run OMCs together account for around 90 per cent of India’s refined product sales.
Vortexa’s Lead Freight Analyst Ioannis Papadimitriou in a January 22 commentary said that 100 Aframaxes/ Suezmaxes which were active in Russia were sanctioned by OFAC on January 10 and were effectively removed from the supply picture.
“Non-sanctioned tonnage above the (price) cap will be inadequate to also cover Russian exports to India and Turkey (about 19 voyages per month need replacing due to recent sanctions). Russian crude exports to India and Turkey will need to be offered below the price cap so that Greek Aframax and Suezmax operators can facilitate these volumes,” he added.
Trade sources said that largely supplies from Russia come through Aframaxes and Suezmaxes, while cargoes from the Middle East are transported through very large crude carriers (VLCCs).
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