IOC Buying 'Clean' Russian Oil, Says Chairman Sahney

Indian Oil Corporation is buying 'clean' Russian crude oil that complies with US sanctions, according to Chairman Arvindar Singh Sahney. This strategic move ensures that the oil bought does not involve sanctioned entities, and the tankers used are properly insured.

India has become the second-largest buyer of Russian crude oil since Moscow's invasion of Ukraine in February 2022. The country's purchases have surged from less than 1% to almost 40% of its total oil imports. The primary reason for this increase is the discounted price of Russian crude oil compared to other internationally traded oil, due to the price cap and European nations shunning Russian oil.

Recently, the US imposed new sanctions on Russia's energy trade, targeting oil producers Gazprom Neft and Surgutneftegas, as well as 183 vessels that have shipped Russian oil. However, Indian Oil Corporation has ensured that its purchases do not involve these sanctioned entities or vessels.

This cap, introduced to limit Moscow's revenues to fund its war in Ukraine, meant that western shipping and insurance services were not available for any oil cargo that was priced more than $60 per barrel.

To circumvent that, Russia used the so-called shadow fleet, insured by its own companies. This fleet has now been sanctioned.

On the sidelines of the India Energy Week, Sahney said sanctions will not have any impact or very marginal impact on the crude availability or energy security of the country. Enough supplies are available around the globe to meet the demand.

The US has not sanctioned Rosneft, the primary entity supplying oil to India, he said, adding out of the around 600 tankers used by Russia, only 183 have been sanctioned.

Going forward Indian firms will look to contract Russian oil that is 'clean' and does 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," Sahney 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 (G7) 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 inputs from PTI)