Experts explain Delhi's oil maneuver

Experts explain Delhi's oil maneuver



Either exorbitant prices or buying at a discount

Energy cooperation, which Russia expects to reorient from the western to the eastern vector, has come into question. Our country's fuel partners, who recently promised Moscow an alliance in the hydrocarbon sector, are in no hurry to expand the energy dialogue with Russian suppliers of raw materials. In particular, India, which this summer brought Russia to second place in terms of imports of hydrocarbons, threatens to drastically reduce the purchase of our hydrocarbons in September, and completely stop the import of domestic liquid hydrocarbons in October.

The question of recalculating the export value of Russian oil in Delhi arose for a reason. In early September, the G7 countries - the USA, Canada, Japan, Great Britain, France, Germany and Italy - agreed to introduce a price ceiling for "black gold" from our country. The Western powers devised such a measure to reduce the positive impact of rising world energy prices on Russia's export earnings.

Moscow offered India to supply oil at lower prices on the condition that New Delhi refuses to support the initiative of the G7 countries to set maximum prices for Russian oil. “A decision on this issue will be made later, as negotiations progress with all partners,” the representatives of India said.

Meanwhile, some nuances of Russia's cooperation with the Middle East and Asian countries can already be noted, which is formed more likely by political rather than economic arguments.

In the first half of the year, India increased oil imports from Russia by almost 50 times, lifting our country to the second line of exporters. After the start of the special operation in Ukraine, Western countries began to refuse to buy Russian energy carriers, which led to a change in sales markets.

For India, our oil was sold at a 30% discount. This price compensated for transportation costs and allowed Indian suppliers to save significantly on the “transport shoulder”. And now the picture is changing.

“A decrease in the volume of deliveries of Russian hydrocarbons in this direction can be traced. First of all, the negative trend is related to prices: today, Russian oil for Indian refineries costs $5-7 more than African or Arab raw materials,” said Vladimir Chernov, analyst at Freedom Finance Global.

According to The Times of India, a number of major refineries such as IndianOil Corp, Reliance Industries, Bharat Petroleum and Nayara Energy have reduced their hydrocarbon consumption due to scheduled maintenance shutdowns.

“In September, which has not yet ended, India has already imported about 2 million tons of Russian oil. In August, the supply of “black gold” from our country amounted to 3.55 million tons, so it’s too early to talk about a decrease in the purchase of domestic energy resources by Indian buyers,” the analyst believes.

Do not forget that the West is going to impose cap prices on export oil and gas from Russia. “The Europeans plan to determine the maximum energy tariffs for Russian hydrocarbons by the start of the EU embargo on Russian oil, which should come into force in December,” explains Chernov. — The US Treasury's tentative guidance partly explains the principles of a price ceiling that all countries that agree to impose price caps can join. The EU countries are going to finalize the framework of the cost ceiling, that is, the marginal prices of Russian hydrocarbons, by the start of the embargo on Russian oil, which should come into force in December.”

“If the plan of the West to limit the export of Russian oil works, then the world will plunge into an energy crisis, the scale of which will be greater than in the 1970s and 1980s. Russia has declared that it will not sell oil to countries that have adopted a price ceiling for our raw materials. As of June 2022, Russia exported about 7.5 million barrels of "black gold" per day. The world market may lose the lion's share of these "barrels". It will not be possible for other oil-producing countries to fill the gap that has arisen on their own. Investments in new capacities of the manufacturing industry, which have been declining for more than 8 years, will not help. As a result, prices will skyrocket; quotes of $120-150 per barrel could easily be reached as early as early next year. Then India will face a new choice: either to support the West and buy energy resources through intermediaries at exorbitant prices, or to buy goods from Russian producers who provide significant discounts. The choice, I think, is obvious,” said Nikolai Vavilov, a specialist in the Strategic Research Department at Total Research.



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