Russian oil will flow to South Asia. India has purchased at least three million barrels of Urals and Moscow is ready to increase supplies. Discuss contracts with Indonesia and other countries in the region. However, while quotes are going up, discounts can be made for a new direction. Will the possible sanctions of the West interfere with the plans, RIA Novosti investigated.
Rubles and rupees
“We will be ready to supply India with any goods that it wants to purchase. We will find a way to overcome the artificial obstacles created by the illegal unilateral sanctions of the West,” Russian Foreign Minister Sergei Lavrov said at a press conference after talks in New Delhi. This means that in the context of the disconnection of several large Russian banks from SWIFT, tranches will go through the Central Bank’s financial messaging system (SPFS). The minister meant, among other things, oil deals.
A week earlier, an Indian government spokesman told reporters on condition of anonymity that the country would increase imports of Russian oil. And at a discount, as the economy struggled to get back on its feet after the pandemic. Three million barrels have already been purchased. According to Indian and Western media reports, Russia offered a price 20% below world prices. According to Bloomberg, Urals oil will be sold for $57 per barrel.
India has not joined the sanctions pressure. Despite US calls to avoid deals with Russia, officials say energy contracts are legal and out of politics. In addition, for a country that imports 85% of its oil consumption, the surge in world prices is a serious problem. A contract with a discount would come in very handy.
True, Indian Foreign Mi-nistry spokesman Arindam Bagchine does not disclose exactly what volumes are coming in: “We are studying all offers on the world market. I don’t think that Russia is a major supplier.”
Moscow has not yet commented on the figures for the deal. Deputy Prime Minister Alexander Novak, however, said that the export of domestic oil and petroleum products to India approached the amount of a billion dollars. And he stressed: “There are good opportunities to increase this indicator.”
Rosneft will sign a contract with the country’s largest oil and gas corporation IndianOil, Bloomberg claims. Volumes – at least 15 million barrels during the year. IndianOil declined to comment. But industry observers report that since the beginning of March there has been a significant increase in Russian oil supplies to India.
Washington has already warned New Delhi of a “great risk” in the event of a significant increase in Russian oil imports, Reuters writes. At the same time, the US does not object to the very fact of the purchase and allows for a “slight increase in supplies” since Joe Biden sees India as a critical partner against China’s growing influence in Asia.
New market for Russia
Other countries in South and Southeast Asia are also showing interest. “There is an opportunity to buy crude oil at a good price,” says Nike Vidyawati, director of the Indonesian state-owned oil and gas company PT Pertamina. “We are coordinating actions with the Foreign Ministry and with the Bank of Indonesia.”
Payments, Vidyawati ad-mits, could go through In-dia. The deal will not have political problems, he is sure, until the participating companies are sanctioned. But Western pressure cannot be ruled out after the conclusion of the contract, as in the case of the Chi-nese Huawei, which supplied smartphones to Iran.
“I don’t know if any of the Asian importers will be able to buy Russian oil. Shell did it, and the consequences are known,” said a Far East trader (his name was not disclosed) to S&P Global media holding, referring to the group’s statement about the immediate cessation of spot purchases Russian crude oil.
Nevertheless, sales to Asia go. One of the most authoritative experts on global energy, Daniel Yergin, author of the cult book “Production”, believes: “It looks like Asia will become the main market for Russian oil, which used to go to Europe.” Real-time tracking company Vortexa also claims that Russian oil is moving to Asia. Its exports to Europe fell by 280,000 barrels a day in March to 1.3 million. Daily deliveries to Asia increased by 220,000 barrels.
In 2021, Asia bought only five percent of Russian crude oil imports. The main purchaser is China: 1.6 million barrels per day. For comparison, India – 43 thousand barrels. Other major importers include South Korea and Japan. In the new reality, the numbers are likely to increase significantly.
From near to far
Meanwhile, oil tariffs are about 80% higher than a year ago. It is possible that spot prices will rise even more as demand rises amid tight supplies, traders said. So, Saudi Arabia will raise prices in May. For example, Saudi Aramco increased the tariff for Arab Light for Asian counterparties by more than nine dollars per barrel. The Arab states are in a privileged position: the countries of the West, wh-ich have barely enough en-ergy reserves of their own, come to the Middle East with an outstretched hand.
But Joe Biden’s request for gas price talks was ignored by Saudi Arabia and the UAE. For the Middle Eastern countries, Asia remains the main market for oil and gas. Thus, Qatar, on the supply of liquefied natural gas from which Germany counted, does not seek to move closer to the EU. Energy Minister Saad al-Kaabi, speaking before the international conference “Doha Forum”, said: “I do not think that we are able to provide urgent assistance (to Europe. – Approx. ed.). No one will replace Russia in the supply of energy.” Later, he clarified that Qatar will be able to supply large volumes of LNG to the European Union no earlier than in five years.
In Europe itself, it is also recognized that it is almost impossible to quickly find alternative sources. Austrian Foreign Minister Alexander Schallenberg even spoke out against the gas embargo with Russia.
At the same time, South and East Asia also understand the risks – because of the threat of secondary sanctions. Therefore, Asian countries will seek maximum discounts from Russia. However, they are unlikely to refuse to expand contracts.
“Under the current conditions, it is profitable to buy Russian oil without putting all your eggs in one basket and diversifying the supply structure,” says industrial expert Leonid Khazanov. need”.
He recalls that India and China are purchasing potassium chloride from Belaruskali, which is under sanctions, which means they can do the same with oil. “They will find ways to circumvent restrictions and obstacles. Of course, sanctions can have a certain impact on the actions of certain Asian companies interested in buying. Never-theless, it is unlikely that all of them will listen to Biden or European officials,” Khazanov concludes.
The sale of Urals at a discount of almost $35 to the price of Brent, the expert believes, will in any case bring good revenues to the federal budget. In addition, it is not the state that sells oil and gas, but Russian commercial companies. And even in the current geopolitical situation, they certainly count on good profits. In addition, the geography of transactions can also be affected by logistics, which is now extremely complicated towards Europe.
“In March, we saw a strong increase in the export of Russian liquid hydrocarbons. Even with a discount, the price of selling oil to Asia is much higher than in January. And the profit from contacts can be much higher than planned in the Russian budget for 2022,” says Alexey Grivach, Deputy General Director of the National Energy Security Fund.
For gas, the analyst notes, the situation is more complicated: spot prices have long been extremely high around the world, especially for LNG. Asian companies are interested in supplying pipeline fuel from Russia, which they can then resell to the European market. Therefore, the gas flow from Siberia to Asia is unlikely to weaken.