India is expected to refine the sanctioned crude and send it back to the bloc as diesel © Getty Images / ChrisHepburn
India may substantially boost its exports of diesel fuel to the EU, refined from Russian oil targeted by Western sanctions, Bloomberg reported on Monday.
The scheme wouldn’t breach the EU’s regulations, but it highlights the inefficiency inherent in the sanctions policy, the report notes.
The EU ban on almost all imports of Russian oil products kicks in on February 5, coinciding with the implementation of a price cap on sea-borne crude shipped from the sanctioned country. The latest Ukraine-related penalties ban Western businesses from providing services, like insurance, for Russian oil cargoes unless it’s purchased at or below $60 per barrel. The ceiling is expected to be revised depending on market conditions.
Until recently, Russia was the biggest external supplier of diesel to EU countries, which have been ramping up purchases ahead of the cutoff.
Due to the sanctions, the global market is projected to see a great rerouting of diesel flows as new importers of Russian crude are sending fuel back to the former buyers. Analysts expect a growing risk of higher prices in the short term. Among the new buyers of sanctioned Russian oil products will reportedly be traders in Africa, Latin America and possibly Asia.
“The loss of Russian barrels is huge and replacing them will be a huge logistical challenge,” Keshav Lohiya, founder of consultant Oilytics, told Bloomberg. “But the market is pricing in less panic as markets and trade flows have proven resilient. This will be a new rerouting of diesel.”
India’s role in supplying EU member states is reportedly significant, as the South Asian nation has turned into one of the largest importers of discounted Russian crude since last year.
At the beginning of 2022, Russia’s share of India’s oil imports amounted to just 0.2%. By the end of last year, it had grown to nearly one million barrels per day, reaching more than 20% of the country’s oil import basket. India, the world’s third-biggest importer of crude oil after China and the US, remained Russia’s top importer for three months in a row as of December.
India, along with the US, has recently been boosting exports of diesel, the fuel pillar of the global economy, to the EU, as production levels there currently exceed domestic consumption.
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