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India stops taking Russian oil delivered on Sovcomflot tankers

Bloomberg
Bloomberg • 2 min read
India stops taking Russian oil delivered on Sovcomflot tankers
Refiners are scrutinizing the ownership of each ship to make sure they’re not affiliated with the company, or other sanctioned groups. Photo: Bloomberg
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All of India’s refiners are now refusing to take Russian crude carried on PJSC Sovcomflot tankers due to US sanctions, further complicating the trade that has flourished since the invasion of Ukraine two years ago.

Private and state-run processors including the biggest — Indian Oil Corp. — have stopped taking cargoes if they’re on Sovcomflot tankers, said people familiar with the matter. Refiners are scrutinizing the ownership of each ship to make sure they’re not affiliated with the company, or other sanctioned groups, they added, asking not to be named because the information is private.

The broader pushback follows a similar move by India’s biggest private refiner, Reliance Industries Ltd., reported earlier this week. The heightened scrutiny on the tanker giant appears to have also swept up other oil ships carrying Russian oil, with two vessels waiting several weeks off the South Asian coast without any indication of when they will unload.

Indian Oil, Bharat Petroleum Corp., Hindustan Petroleum Corp., Mangalore Refinery & Petrochemicals Ltd. and Nayara Energy Ltd. — 49% owned by Russia’s Rosneft PJSC — didn’t immediately reply to emails seeking comment.

Sovcomflot declined to comment on its operational activities.

Last month, the US Treasury’s Office of Foreign Assets Control designated Sovcomflot and identified 14 crude oil tankers in which the state-controlled firm has an interest. That came on top of wider measures already imposed on non-Sovcomflot ships and Russia-friendly companies since October for violations of a Group of Seven cap on the price of Russian oil.

See also: Russian government’s oil revenue was up almost 50% in June

India has been a major buyer of Russia oil since the invasion of Ukraine, but tighter enforcement of US sanctions has disrupted the trade and led to refiners seeking more expensive crude from other regions such as the US. Sovcomflot said this week that the penalties were putting pressure on its operations.

The Sovcomflot issue means there are fewer tankers to deliver Russian crude, which has led to discounts for the nation’s oil narrowing to compensate for higher freight costs, the people said. 

The discount to comparable supplies blew out to US$30 ($40.44) a barrel after the war, but that’s narrowed and is currently about US$2 - US$4 for Indian buyers. The South Asian nation is still expected to take large volumes of Russian crude this month, with Kpler estimating imports of 1.8 million barrels a day — the highest since July.

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