Russia's oil export ban may bolster India crude imports

Moscow's decision to ban oil exports to potential Western buyers supporting a price cap will likely boost Indian imports of Russian crude, industry executives told ET.

The West, which insists on a strict price cap on supplies from Moscow, has already imposed a ban on the bulk of Russian crude exports. Some residual volumes still being imported into Europe via pipelines could now be affected by the latest Kremlin move. This could leave Russia with surplus crude oil volumes, something Moscow may want India and China to absorb.

However, since China is struggling with Covid infections, it may not have the demand for incremental Russian supplies, an Indian refinery executive said. "This would leave India with an opportunity to import more from Russia," said this executive, who didn't want to be named. This would also give India a greater bargaining power with prices, said the executive.


The US and its allies have barred their shippers, financiers, and insurers from backing any trade in Russian oil at prices exceeding $60 per barrel.

Some Russian grades trading below price cap
This has prompted Russia to ban the sale of its oil from February 1 to "foreign companies and individuals if the contracts on these sales include the use of this mechanism, directly or indirectly". The ban "applies to all stages of sales up to and including the final buyer," the Russian government said in a statement.

To be sure, the prices of certain crude-oil grades might not breach the price ceiling.

"It's clear that the oil purchase contracts can't have any reference to the price cap," said another industry executive, unwilling to be named. "But that doesn't mean the contract prices will necessarily be above the price cap since some Russian grades are already trading below the cap."

Russia's flagship crude Urals is currently trading around $54 per barrel, lower than the cap of $60, and at a deep discount to the international benchmark Brent, which is around $82. ESPO and Sokol, Russia's other crude grades, are selling for $71 and $76 per barrel, respectively.

"It's unclear how Russia will implement its plan going up to the final buyer," said the second executive cited above.

Russia relies heavily on traders to sell its crude and it will be hard to track every cargo, especially at a time when shipments are changing destinations and customers midway.

Russia has also amassed a large number of ships to deal with any shortage that might arise due to the price cap. Executives believe the Russian fleet will be helpful in transporting such grades of oil that are trading above the price cap. For the flagship Urals crude, which is trading below the cap, services from the West will anyway be available. In November, Urals comprised about 80% of India's Russian crude-oil imports.