Western sanctions against Russia over the invasion of Ukraine have caused many companies and countries to shun its oil.
After Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) has bought two million barrels of Russian crude oil, while Indian refineries stepped up efforts to make Russian oil available at huge discounts. Like IOC, HPCL also bought crude Russian Urals through European trader Vitol, sources with knowledge of the development said.
Separately, Mangalore Refinery and Petrochemicals Ltd (MRPL) has launched a tender for one million barrels of similar crude oil. Western sanctions against Russia over the invasion of Ukraine have caused many companies and countries to shun its oil. This has resulted in Russian crude oil being available in the market at great discounts. To seize the opportunity, Indian refineries are organizing tenders to buy such discounted oil. The tenders are usually won by traders, who are said to have stockpiled the cheap Russian oil.
The sources said IOC, the country’s largest oil company, bought three million barrels of Ural through Vitol late last week for delivery in May at a discount of $20-25 a barrel to date of Brent. HPCL made the rare purchase of two million barrels of Ural oil this week to load in May, they said. Meanwhile, Reliance Industries Ltd, operator of the world’s largest refining complex, could avoid buying Russian fuel as it has huge exposure in the US and sanctions against Moscow could affect its operations.
Since 2020, the IOC has a forward or fixed volume deal to buy crude oil from Russia’s Rosneft. But it rarely imported volumes under the term deal, as the cost of transporting the oil from Russia made it uneconomical. , the sources said.
MRPL, which like HPCL is also a subsidiary of the state-owned Oil and Natural Gas Corporation (ONGC), is also looking for a million barrels of such crude for late May loading, they said. The refineries buy Russian crude oil on a delivery basis to avoid any complications that could cause sanctions in arranging shipping and insurance.
The sources said trade with Russia will be settled in dollars, as the international payment mechanism has so far been kept out of Western sanctions. trade with Russia is not prohibited. Essentially, this means that any country or company was free to buy oil and other energy commodities from Russia and use the international payment systems to regulate trade.
This was not the case with Iran, which was cut off from the international money and security transfer system SWIFT. Also, companies or entities that invested or bought oil from Iran were sanctioned. IOC had signed a deal with Rosneft Oil Company in February 2020 to import up to two million tons of oil through the Black Sea port of Novorossiysk. In 2021, the deal envisioned the delivery of up to 1.7 million tons of crude oil, but IOC only bought by package or shipload because the cost of transporting the oil made it uneconomical. In December 2021, it renewed the deal to buy up to two million tons of crude oil from Rosneft by 2022.
India has halted supplies from Russia to the US in an effort to diversify its oil import basket and reduce its dependence on the Middle East to meet its oil needs. With imports accounting for 85 percent of its oil needs, the recent spike in international oil prices has hurt it badly and it is now trying to cut rising energy bills by buying at cheaper rates wherever it can.
Oil Minister Hardeep Singh Puri told Rajya Sabha on Monday that the country will evaluate Russia’s offer to sell crude oil at discounted prices, after considering aspects such as insurance and freight needed to fuel the non-traditional supplier.” that in a situation such as that characterized by the pandemic of the past two years and in recent weeks by a war or a military action taking place between Russia and Ukraine, the government will examine all available options,” had said. he said .
The minister said he has had discussions with Russian government officials. “Talks are currently underway. There are several issues that need to be discussed, such as how much oil is available in Russia or in new markets or with new suppliers that may enter the market. There are also problems with insurance, freight and a host of other issues, including payment arrangements,” he said.
New Delhi has historic diplomatic and defense relations with Moscow and has called for an end to violence in Ukraine, but does not condemn the invasion. Many countries, including European countries, continue to rely heavily on fuel from Russia, the world’s second largest exporter of crude oil after Saudi Arabia. However, only one percent (nearly 45,000 barrels per day in 2021) of India’s total crude oil imports come from Russia.
His decision to use Russian oil at a discount will not violate any of the US sanctions against Moscow, the White House has said. US President Joe Biden last week announced a ban on Russian oil and gas imports in connection with the country’s invasion of Ukraine, targeting the main artery of the Russian economy.
“Our message to every country remains that we abide by the sanctions we have imposed and recommended,” White House press secretary Jen Psaki told reporters at her daily news conference on Tuesday. Russia’s offer of discounted crude oil, Psaki said, “I don’t believe this would violate those (sanctions).” GlobalData, a leading data and analytics firm, said that given India’s neutral stance on the Russia-Ukraine conflict, Moscow’s supply of oil and other commodities at discounted prices will provide fiscal relief.
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