India Refuses To Buy Russian Premium Oil

Imports have stopped.

India, which has become the largest buyer of offshore oil shipments from Russia, has not purchased Russian premium-grade ESPO oil for two months. This follows from the Kpler data cited by Kommersant.

Last year, ESPO supplies to India averaged about 95,000 barrels per day, and in 2022 – 60,000 barrels per day. But in January and February this year, imports stopped.

ESPO is a grade of oil with a low sulfur content (less than 0.6%), which is supplied by Russia to Asia from the fields of Eastern Siberia. The pricing of the variety is traditionally tied to the Dubai variety. After the outbreak of the war in Ukraine, it traded at a small discount to the benchmark, unlike the main export variety Urals. At the same time, ESPO quotations always exceeded the $60 price ceiling for Russian oil, which was established by the G7 countries as part of the sanctions.

India increased ESPO imports after some buyers abandoned purchases in 2022 due to sanctions. In particular, imports were stopped by the United States, South Korea and Japan. However, in recent months, the situation has changed dramatically. India's abandonment of ESPO coincided with the US tightening of the Russian oil price ceiling in November 2023.

India has also reduced shipments of another premium grade of Russian oil — Sokol. Rosneft and Indian Oil could not find a compromise on payments for the supply of this variety. As a result, about 10 million barrels were acquired by other Indian companies and buyers in China.

One of the main reasons for the decline in imports is problems with payments, which back in December led to the fact that oil supplies from Russia to the Indian market fell by a third compared to the peak value of 1.48 million barrels per day.

All Russian grades of oil, which are "obviously traded above the price cap", cause certain concerns among Indian buyers, says Viktor Katon from Kpler. At the same time, according to him, there are no such problems for Chinese oil refiners, since payments are made by telegraphic transfer, and in yuan trade takes place outside the knowledge of the sanctioning parties.

ESPO is only under quasi-sanctions: if oil is not traded in dollars, as well as if freight and insurance are not Western, then there is no need to talk about the application of the price ceiling, Cato concluded.

Meanwhile, the Federal Customs Service of the Russian Federation recorded a sharp decline in foreign trade turnover in January 2024. In particular, exports fell by 14.2%, to $28.7 billion. This was primarily due to the fall in oil prices. At the same time, as the Central Bank notes, export revenue began to arrive in the country with a delay of about two months. This year, the Central Bank predicts a reduction in oil and gas exports, which may last for the next three years.