Market experts — and even some people involved in energy trading — say it’s not so clear-cut.
India’s consumption russian raw It was minimal and sporadic before President Vladimir Putin’s forces invaded Ukraine, but has since increased, becoming a key tool for Prime Minister Narendra Modi’s bid to fight energy inflation.
Yet the structure of India’s oil trade means that the final price it pays includes shipping, insurance and other costs upon arrival at its ports, without a detailed breakdown. That makes it hard to know how much it is actually paying Russia, and whether it is falling short of a goal of limiting Moscow’s revenue from crude sales.
“The reality is that this market has become extremely opaque,” said Vandana Hari, founder of Vanda Insights in Singapore. “It’s almost impossible to take out the cost of middlemen.”
The uncertainty about how much India pays is part of the haziness surrounding Russian oil flows, as trade shifts from the Atlantic basin to Asia and from large traders to smaller entities. And it highlights Ukraine’s uphill struggle to enforce or even encourage compliance with sanctions imposed over the past year by its allies.
India’s oil ministry, commerce ministry and external affairs ministry did not respond to requests for comments.
Since Modi’s government has never signed the G-7 cap, it is under no obligation to comply – unless it is using Western insurance or shipping services. And while people familiar with the matter say the government will not break the restrictions – and has asked banks and merchants to follow the rules – comes the challenge of monitoring or enforcing such pledges.
For example, a “grey fleet” of tankers has emerged to supply buyers in places such as India and China, which continue to depend on Russian crude.
That has helped reduce overall raw material transportation costs, according to Victor Catona, principal analyst at Kpler. But the rise of Gray Fleet and other middlemen in the Russian oil trade makes finding price data even more difficult, and official figures are of little help.
Data from India’s commerce ministry showed the average price of Russian crude in the country in January was $79.80 a barrel, well above the $60 range. That final price, which includes shipping, insurance and other expenses, would imply extraordinary logistics costs if the cap was not breached during the month.
The difference between the landed price – the cost when the oil arrives at port – and the free-on-board price, which does not include shipping, insurance and other ancillary charges, is the root of the problem. In addition, India often reserves its oil in transit after it has already left Russia and adds to the complexity of determining the original price.
That’s according to two companies that have long published Russian oil prices — Argus Media Ltd., whose data has over the years determined the export fees Moscow gets from foreign sales, and S&P Global Insights, which is compiled by traders from Platts. Better known as – the price is well below the price cap paid at the point of export.
Argus data for the end of February showed the export price of Ural, Russia’s flagship grade and the variety that India is actually carrying, at around $45 a barrel. Platts, which rated it at similar levels, also publishes delivered-to-India prices for the Ural grade. That price — which includes delivery costs — is up from $60 a barrel since January 18, when Platts started it, and stood at $64.31 on March 10.
If true, those analyzes are good news for the Biden administration, which is eager to support efforts to stave off the Russian war machine while ensuring a smooth flow to large emerging nations.
A US government official, who asked not to be identified discussing non-public information, said he viewed point-of-export (FOB) prices published by Argus Media and Platts as the best indicator of Russian revenue. and the data are consistent with what Treasury heard anecdotally, even though they acknowledged the ambiguity of the situation.
But then there has been recent buying by Indian refiners of Russian ESPO crude loadings from the Far East and according to Asian traders trading at a price above the flagship Ural blend, which is not out to suggest higher values.
Another group of researchers, with access to invoice data of Russia’s oil exports, estimated that Indian firms paid an average of $64 a barrel for Russian oil in the weeks after the price cap was introduced.
Refinery officials in India, who asked not to be identified discussing sensitive issues, gave no explanation of how exact compliance with the $60 limit would be established. From the delivered price, an official said, it is not possible to be sure about the purchase price.
While the US and its allies say they believe India is buying below the cap, they would prefer to isolate Delhi for criticism. No government wants to isolate the world’s most populous country, which is seen as a key swing-state in rising US-China tensions, beyond the dynamics of the war in Ukraine.
On Tuesday, a US official said the bulk of Russian marine oil – about 75% – is being traded without the use of Western services. And the official, Assistant Treasury Secretary Ben Harris, said that while there is likely some “sabotage” in the price range, he said Russian finance ministry figures show Moscow is short of revenue.
For now, however, uncertainty threatens to slow purchases, as Indian refinery officials and banks struggle with the additional information needed due to sanctions and price limits. This is because even though India is not party to the price cap, its banks and other companies want to avoid potentially breaking the restrictions.
The looming question in the coming months is whether the Western approach will hold. Will Washington and its allies seek to toughen punishment on Russia as the war enters its second year, or opt for a more laissez-faire approach in favor of ensuring continued flows?
“They’re trying to cut carrots and sticks,” said Maria Shagina, a sanctions expert at the International Institute for Strategic Studies, explaining the US assertions on compliance and avoidance of accusations. “It’s impossible to waterproof it. It’s about the scale of the leak.
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