IOC Purchasing 'Clean' Russian Crude Oil Amid US Sanctions: Chairperson

Indian Oil Corp. is purchasing "clean" Russian crude oil that does not risk running foul of US sanctions, Chairperson Arvindar Singh Sahney said on Tuesday.

Since Moscow's invasion of Ukraine in February 2022, India has become the second-largest buyer of Russian crude oil, with its purchases increasing from less than 1% of total oil imports to almost 40%.

This increase is mainly due to Russian crude oil being available at a discount compared to other internationally traded oil, as a result of the price cap and European nations avoiding purchases from Moscow.

Last month, the US imposed new sanctions on Russia's energy trade. These sanctions targeted Russian oil producers Gazprom Neft and Surgutneftegas, as well as 183 vessels that have transported Russian oil.

Russia has used these tankers to ship oil to countries like India and China after the Group of Seven countries imposed a $60-per-barrel price cap on Kremlin exports in 2022.

This cap, aimed at limiting Moscow's revenue for its war in Ukraine, restricted western shipping and insurance services for any oil cargo priced above $60 per barrel.

To get around this, Russia used a "shadow fleet" insured by its own companies, which has now been sanctioned.

On the sidelines of India Energy Week, Sahney said the sanctions would have little to no impact on the country's crude oil availability or energy security. There are sufficient supplies globally to meet demand.

The US has not sanctioned Rosneft, the main supplier of oil to India, Sahney added, noting that out of approximately 600 tankers used by Russia, only 183 have been sanctioned.

Going forward Indian firms will look to contract Russian oil that is 'clean' and not attract sanctions. "We buy Russian oil on a delivered basis which means that the supplier makes arrangements for transportation. We have to see that the tankers carrying Russian oil are not sanctioned and have proper insurance because no port will allow any ship without insurance cover," he said.

Sanctioned Russian tankers will not be allowed to dock at Indian ports, government sources said, adding that the only exception would be for Russian oil cargoes booked during the wind-down period.

Indian firms can seek additional oil from the Middle East and elsewhere in the world in case of any shortage from Russia.

In the worst-case scenario, the Russian crude, which India was getting at a discount, will not be available at a discount, sources said.

In an attempt to restrict funds for Russia's war machine, The Group of Seven rich nations, the European Union and Australia put an embargo on Russian crude and introduced a $60 per barrel price cap in December 2022.

Over the next 12 months, the price cap and embargo had a significant impact on revenues and forced Russia to find new markets and ways to transport its oil.

Russia did this by offering deep discounts on its Urals grade crude. This discount last month fell to $2-3 per barrel.

In the first year of the sanctions Russia was losing on an average, 23% of its Urals crude export revenues every month due to the price cap and embargo.

This figure has fallen sharply to a mere monthly average of 9% in the second year of the cap. This is because Russia built a network of 'shadow' tankers, which could trade its oil above the cap to new markets in non-sanctioning countries.

(With PTI inputs)