Crude concerns about Russian oil

India may have to rely on 'dark fleets' to keep this source flowing once the EU's price cap kicks in

- S DINAKAR

India will need to travel back in time and seek inspiration from football greats Tulsidas Balaram and Chuni Goswami to deftly dribble around and sidestep the West-imposed price cap on exports of Russian seaborne crude oil. India depends on imported oil to meet 86 per cent of its needs, of which nearly a quarter now comes from Russia. The copious flows are roughly 10 per cent cheaper than competing suppliers helping India save billions of dollars in fuel costs.

On Friday, the G7 nations and Australia agreed on a $60 per barrel price cap on exports of Russian oil with effect from December 5. Vessels loaded with Russian crude prior to December 5 and unloaded at the final destination by January 19 would be exempt from the cap, enabling India to keep Russian oil flowing this December at least.

Russian Urals blend trades at $65-$67 a barrel in Europe, quite close to the proposed cap. India paid an average of $86 a barrel in October for Russian oil after including trader margins, freight and insurance. That leaves more than $10 a barrel on the table for Indian refiners compared to competitor crudes, a BPCL official explained. The landed cost of Saudi and US crude during the period was $99 a barrel and $97 a barrel respectively, according to customs data.

Predictably, Russia has refused to accept the cap and threatened to stop all flows, leaving consumers like India on the edge.

The G7 price cap will allow non-EU countries to continue importing seaborne Russian crude oil, but the catch is that it will prohibit shipping and insurance companies from handling cargoes of Russian crude around the globe, unless it is sold for less than the price cap. A US official told reporters on Friday that the $60 per barrel cap will keep global markets well supplied while "institutionalising" discounts.