ua en ru

Russia's challenges in exporting oil to India due to sanctions: Bloomberg unveils details

Russia's challenges in exporting oil to India due to sanctions: Bloomberg unveils details Photo: Western sacntions affect the import of crude oil from Russia to India (Getty Images)

The import of crude oil from Russia to India has declined due to payment issues exacerbated by Western sanctions, reports Bloomberg.

"After rising to an all time record of 2.15 million barrels a day in May, oil imports from Russia fluctuated downwards, experiencing a sharp decline between November and December to 1.48 million barrels a day last month," the article states.

Analysts point out that Sokol crude oil could not be delivered due to payment problems amid tightening sanctions.

Causes of the problem

Indian refineries, which purchased an average of 140,000 barrels per day from Sokol in 2023, could not receive any such shipments last month.

Sakhalin-1, which extracts oil in the Russian Far East, could not open a bank account in the United Arab Emirates to allow buyers to pay in dirhams. Victor Katona, a leading commodity analyst at Kpler, stated that two out of six tankers anchored off the coast of India indicated they might change their route to China.

Russia-India trade continues

Bloomberg suggests that trade in Sokol oil between Russia and India is likely to continue.

"Three additional ship-to-ship transfer operations of Sokol cargoes and three new cargoes — NS Antarctic, Jaguar, Vostochny Prospect — now indicating India as their final destination," Katona states.

For the entire year of 2023, India's oil imports from Russia more than doubled compared to the same period last year, reaching 1.79 million barrels per day, while oil imports from Iraq, the second-largest supplier, decreased by 11% to 908,000 barrels per day.

Russian oil exports

Revenues from oil exports form the backbone of the Russian budget, supporting Moscow's military economy.

The EU banned the import of sea-delivered crude oil and refined petroleum products from Russia. The consequences of the oil ban for Russia are significant, as nearly half of its total oil exports went to the EU. In 2021, the EU imported €71 billion worth of oil, including €48 billion for crude oil and €23 billion for refined products from Russia. Losing this leading revenue market has a significant structural impact on Russia, whose budget is heavily reliant on oil revenues.

Simultaneously, the Indian route, one of Russia's most lucrative oil trade routes since the introduction of Western sanctions, faces a serious problem due to currency payment issues and lacks a short-term solution.