Russia Sanctions: India Profiting From Russian Oil Trade by Exporting Refined Petroleum

India is defying western sanctions to buy millions of barrels of discounted Russian crude oil, hiding their origin and exporting refined petroleum products with a big markup to make a huge profit. China has yet to increase its oil imports from Russia, according to news reports. Meanwhile, India's neighbors Bangladesh and Pakistan are abiding by western sanctions and paying much higher market prices to buy oil for their domestic needs, and hurting their people. Such double standards are not going unnoticed. 

India's Refined Petroleum Exports.Source: MarketWatch


India is importing large amounts of deeply discounted Russian crude, running its refiners well above capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe, according to MarketWatch.  “As the EU weans from Russian refined products, we have a growing suspicion that India is becoming the de facto refining hub for Europe,” said Michael Tran, global energy strategist at RBC Capital Markets, in a Tuesday note. Here’s how the puzzle pieces fit together, according to Tran:

"India is buying record amounts of severely discounted Russian crude, running its refiners above nameplate capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe. In short, the EU policy of tightening the screws on Russia is a policy win, but the unintended consequence is that Europe is effectively importing inflation to its own citizens. This is not only an economic boon for India, but it also serves as an accelerator for India’s place in the new geopolitically rewritten oil trade map. What we mean is that the EU policy effectively makes India an increasingly vital energy source for Europe. This was historically never the case, and it is why Indian product exports have been clocking in at all-time-high levels over recent months". 

Bangladesh and Pakistan are afraid to buy Russian oil for fear of western sanctions while American ally India feels free to do so. As Pakistani Finance Minister Miftah Ismail told CNN's Becky Anderson in an interview, “It is very difficult for me to imagine buying Russian oil. At this point I think that it would not be possible for Pakistani banks to open LCs or arrange to buy Russian oil". Similarly, Bangladeshi Foreign Minister AK Abdul Momen told journalists: “You are seeing that they (western nations) keep bossing us and you (journalists) also encourage them. Every day, they come up with new issues. We used to call them development partners. They do not pay for the development but keep giving advice.” “We do not want to get into any problem. We want peace in the world,” Momen added. 

The West, particularly the United States, is turning a blind eye to India's actions when it comes to busting sanctions on Russia. Indian Prime Minister Narendra is openly funding the war in Ukraine by buying weapons and oil from Russia. At the same time, India's smaller neighbors feel intimidated by the threat of western sanctions if they follow Modi's example. Such double standards are not going unnoticed. 

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  • Riaz Haq

    India's export destinations: Netherlands and Brazil leapfrog ahead

    While several countries have reduced their dependence on Russia-refined oil products, India, which has seen a sharp spike in crude imported from Russia, is seen to be processing it and exporting to many countries, especially in Europe.

    Netherlands is now India's third-largest export destination. Brazil, India's 20th biggest export destination between April and October 2021, is currently in the eighth position. US & UAE remain on top.

    Read more at:
    https://economictimes.indiatimes.com/news/economy/foreign-trade/ind...

  • Riaz Haq

    #US: #Pakistan can buy #Russian #oil despite restrictions. “So, we have encouraged countries to take advantage of that, even those countries that have not formally signed on to the price cap, so that they can acquire oil in some cases at a steep discount"
    https://www.dawn.com/news/1733661

    The United States has reiterated that Pakistan can purchase oil from Russia at a discounted price even though it has not signed a Washington-backed price-cap on Russian petroleum products.

    US State Department’s spokesperson Ned Price told reporters at a Tuesday afternoon news briefing that Pakistan can also take advantage of the concessions Washington has given to other countries for buying oil from Russia.

    “So, we have encouraged countries to take advantage of that, even those countries that have not formally signed on to the price cap, so that they can acquire oil in some cases at a steep discount from what they would otherwise acquire from, in this case, Russia,” Mr Price said.

    On December 3, 2022, G7 and EU countries set a price-cap of $60 per barrel on Russian oil to prevent Moscow from using the revenues to finance its war against Ukraine.

    Since, Europe and the United States no longer import crude oil from Russia, the controlled purchase would only affect third countries, like Pakistan. Islamabad has not yet signed the accord, mainly because Pakistan does not import oil from Russia.

    Mr Price said the US approach to the purchase of oil from Russia has been laid out in the price-cap mechanism that it worked out with other countries around the world, including the G7.

    “And the virtue of the price cap is that it allows energy markets to continue to be resourced while depriving Moscow of the revenue it would need to continue to propagate and fuel its brutal war against Ukraine,” the US official said.

    “We have made the point that we have very intentionally not sanctioned Russian oil. Instead, it’s now subject to the price cap.” The US, he said, has been very clear that now was not the time to increase economic activity with Russia.

    “But we understand the imperative of keeping global energy markets well resourced, well supplied, and the price-cap, we believe, provides a mechanism to do that,” he added.

    On Friday, Minister for Economic Affairs Ayaz Sadiq, and Russia’s Energy Minister Nikolay Shulginov said at a joint news conference in Islamabad that they hope to sign an oil deal by late March, enabling Pakistan to buy Russian oil at discounted rates.

    A joint statement issued after their talks said that the two sides reached an in-principle agreement on the supply of Russian crude oil and oil products to Pakistan, with technical details to be finalised in March at the latest.

    “We have decided that it would be a good idea for Pakistan to approach Gazprom and Novatek, two largest LNG-producing companies, in late 2023 to discuss the conditions” for buying LNG, the Russian minister said.

    Energy-starved Pakistan imports approximately 430,000mt of motor gasoline, 200,000mt diesel and 650,000mt crude oil at a cost of $1.3 billion per month.

    Market observers earlier this month warned Pakistan may face fuel shortages in the near future as importers struggle to secure dollars to close deals. The country’s foreign exchange reserves have dwindled to their lowest levels in almost nine years.

    Buying oil from Russia at a discounted price could ease the pressure.

  • Riaz Haq

    #Ukraine wants #US to impose #sanctions against #India for “financing the Russian economy and the Russian military machine". #Russia #oil #economy | Mint

    https://www.livemint.com/news/world/ukraine-wants-us-to-impose-sanc...

    As the Ukraine-Russia war nears the one year mark, a top official has called for sanctions to be imposed against India. Senior Ukrainian lawmaker Oleksandr Merezhko urged the United States to impose secondary sanctions on China and India if they keep buying Russian energy. The official who heads the foreign affairs committee in Ukraine's parliament, also called for greater ties with Taiwan.

    Merezhko said that he had previously lived in New Delhi and found the question of India's oil purchases "painful". But as the war continues with no end in sight, the lawmaker also backed sanctions against buyers contending that such nations were “financing the Russian economy and the Russian military machine".

    "They should be consistent. This is a global conflict between democracy - the free world - and authoritarian regimes. There shouldn't be any compromise because of material economic interest," he said.

    The western sanctions against Moscow are currently not recognised by India.

    Meanwhile, according to a Reuters report citing unnamed sources, Indian refiners have started paying for a significant part of their Russian oil purchases in UAE dirhams. While the purchase of Russian oil does not at present violate any sanctions, banks and financial institutions have become increasingly wary about clearing payments in a manner that will not fall foul of the many measures imposed against the other country.

    Indian refiners and traders are concerned they may not be able to continue to settle trades in dollars, especially if the price of Russian crude rises above a cap imposed by the Group of Seven nations and Australia in December. That has led traders to seek alternative methods of payment, which could also aid Russia's efforts to de-dollarise its economy in response to the Western sanctions.