India will mix Russian oil with banned raw materials from Iran and Venezuela

The “ceiling” of prices for Russian oil, which Western politicians have long threatened us with, is ready to be discussed by buyers of our fuel who have not announced sanctions to Moscow. Indian Energy Minister Hardeep Singh Puri said that Delhi is open to the idea of ​​limiting the price of “black gold” from the Russian Federation. US Deputy Treasury Secretary Wally Adeyemo immediately responded, noting that India was sending “encouraging” signals to set a limit on oil prices from Russia. However, Delhi is not so simple: having agreed to the marginal cost of Russian raw materials, the Indians insist on the right to freely purchase raw materials from Iran and Venezuela, which have long been blacklisted by the West as energy exporters.

India is open to the idea of ​​imposing a ceiling price on Russian oil. Recall that in this way the West intends to deprive Russia of the income received from rising energy prices. The G7 countries have agreed to impose a ceiling on oil prices on September 2. At the same time, they announced their intention to create a “broad coalition” of countries that will support this anti-Russian initiative. The possible accession of Russia-friendly India to it would be an important success for the sanctions instigators. Apparently, therefore, the consent of Delhi was first announced by US Deputy Secretary of the Treasury Wally Adeyemo. Only after him, the Minister of Oil and Gas of India, Hardeep Singh Puri, confirmed that he was “very attentive” to the proposal, noting that at the moment it is impossible to “foresee the consequences of this decision.”

The “ceiling” of prices for Russian “black gold”, announced by the G7 countries, is still extremely vague. The G-7 finance ministers (US, Japan, Canada, Germany, France, Italy and the UK) said they would ban the granting of rights “to the sea transportation of crude oil and oil products of Russian origin around the world” above the ceiling price. At the same time, the size of the marginal price rate itself is not named, as well as the principles for its determination.

As for India, the economy of this South Asian state is growing rapidly after overcoming the coronavirus pandemic. This is facilitated by inexpensive Russian raw materials. Since mid-March, sales of our “black gold” in Delhi have been carried out at a large discount to stock quotes: at first, the discounts were $5 per barrel, then rose to $15, and then reached $30-35 per barrel.

Since the summer, Russia has become the second largest supplier of oil to India, displacing Saudi Arabia to third place. According to the Economic Times, India’s crude oil imports from our country have increased by more than 50 times and now account for 10% of all crude oil purchased by Delhi from abroad. By the way, Iraq remains in the first place, in relation to which the prohibitive measures of the West, obviously, do not work. In this situation, India, which in recent months has almost tripled its import of Russian energy resources (including oil products), to 100,000 barrels per day, put forward its own conditions to the West. Its meaning is simple: if you want us to support the price ceiling against Russia, give us access to sanctioned raw materials from Venezuela and Iran.

There is no doubt that in case of agreeing to such an exchange, Tehran will gladly provide India with its fuel. According to the international analytical company Kpler, tankers located in the Persian Gulf alone have a reserve of over 90 million barrels of Iranian oil. After the sanctions are lifted, it will take a month or two to resolve insurance issues, after which buyers will receive raw materials in the declared volumes. The volumes of raw materials provided by Iran will compensate for the shortage of fuel in importing countries and will keep prices down in the future, as they will mark the return of a large hydrocarbon producer to the world market.

“With respect to Venezuela and Iran, the Americans are ready to review the sanctions. Oil from these countries will cool the market, even though it will be difficult technically to increase production for Tehran and Caracas due to obsolescence of production,” said Artem Deev, head of the analytical department at AMarkets.

Meanwhile, many domestic experts doubt that the United States will spontaneously lift sanctions against Iran and Venezuela. “The situation with Tehran is especially tense, since Washington has not yet been able to reach a compromise on the nuclear deal. It is also difficult with Venezuela: the country’s oil production is partly under the control of Moscow – Russian companies have shares in Venezuelan enterprises. The lifting of sanctions against Iran and Venezuela seems fantastic. This option will not play into the hands of the US or India, since Delhi will have to buy oil at market prices, without taking into account the Russian discount. You can expect compromises. Western countries themselves will look for options to return Russian oil to the world market,” believes Mikhail Oganezov, a specialist in the strategic research department at Total Research.

India is interested in acquiring large volumes of oil from Russia, says Natalia Milchakova, a leading analyst at Freedom Finance Global. “Under the current conditions, Delhi can bargain with Moscow and buy energy resources at a good individual discount of $60-70 per barrel. This corridor suits Russia, as it allows it to compete with OPEC +, and, above all, with Saudi Arabia. If India joins the price ceiling project, Russia will refuse to supply oil to this country. The redistribution of export flows of “black gold” to other friendly states, primarily to China, will increase export oil prices to $200-250 per barrel.

However, Russian export losses can also be predicted. “Oil deliveries from Russia have already dropped significantly, and the budget has sank by 1 trillion rubles – this is the size of the treasury deficit that has manifested itself over the past seven months. The strengthening of sanctions pressure and the closure of oil exports can cause serious damage to the economy of our country. Let’s hope that Russia will be able to redirect the flow of energy resources to Asia, which is ready to purchase oil at a discount,” Deev believes.