Smart India: Buys cheap Russian oil and turns it into fuel for Europe
India is playing an increasingly important role in global oil markets, buying cheap Russian oil and refining it into fuel for Europe and the United States.
Nonetheless, New Delhi has faced little public backlash because it is meeting the West's twin goals of reducing Moscow's energy revenues and preventing an oil shock. And as Europe ramps up sanctions, India will become ever more central to the global oil map, redrawn by Vladimir Putin's year-long war in Ukraine.
“US Treasury officials have two main goals: to keep the market well supplied and to deprive Russia of oil revenues,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies, a Washington think tank. “They are aware that Indian and Chinese refiners can achieve higher margins by buying Russian crude at a discount and exporting products at market prices. That's fine with them."
India shipped about 89,000 barrels a day of gasoline and diesel to New York last month, the most in nearly four years, according to intelligence firm Kpler. Daily flows of low sulfur diesel to Europe were 172,000 barrels in January, the most since October 2021.
The Asian nation's importance is set to increase after new EU sanctions on Russian oil exports come into force on Sunday. The ban will take a huge volume of diesel off the market and see more consumers, especially in Europe, turn to Asia to fill the supply gap.
This will make cheap Russian oil even more attractive to India, which depends on imports to meet about 85% of its crude oil needs. The country's refineries, including state-owned ones that cater to domestic demand, ramped up exports last year to profit from rising international prices.
Feed the West
"India is a net exporter of refined commodities and much of that will go to the West to help ease current tensions," said Warren Patterson, head of commodity strategy at Singapore-based ING Group NV. “It is quite clear that an increasing share of the raw materials used for this product comes from Russia.”
According to EU guidelines, India is probably playing within the rules. When Russian crude is processed into fuel in a country outside the bloc, such as India, the refined products can be delivered to the EU because they are not considered to be of Russian origin.
The Group of Seven nations are keen to cut Moscow's revenue as much as possible, but they also have an interest in ensuring that Russian oil and refined products keep flowing to avoid a contraction in global supplies, said Serena Huang, principal analyst for Asia at Vortexa Ltd.
Then India will save Europe from the consequences of its own decisions on Russian sanctions. It will not be a free bailout, but it will make Indian entrepreneurs increasingly richer, as they are starting to overtake Chinese entrepreneurs in terms of wealth. Obviously all this on the shoulders of European consumers, who will finance all this change out of their own pockets.
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The article Smart India: Buying cheap Russian oil and turning it into fuel for Europe comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/india-astuta-compra-petrolio-russo-a-basso-costo-e-lo-trasforma-in-carburante-per-leuropa/ on Sun, 05 Feb 2023 09:19:21 +0000.