Despite sanctions imposed by the West, Russian oil continues to power European vehicles – but only after passing through India's oil refineries.
Bloomberg reported on this development in an April 28 article, citing data from analytics firm Kpler. According to the piece, the South Asian country is on track to become Europe's largest supplier of refined fuels. It also pointed out that India is simultaneously buying record amounts of Russian crude.
"Russian oil is finding its way back into Europe despite all the sanctioning. India ramping up fuel exports to the West is a good example of it. With India taking in so much Russian barrels, it's inevitable," said Kpler lead crude analyst Viktor Katona.
On one hand, data from the analytics firm showed that Europe's refined fuel imports from India are set to surge about 360,000 barrels per day (bpd), just ahead of those from Saudi Arabia. On the other hand, Russian crude oil arrivals to India are expected to surpass two million bpd – amounting to almost 44 percent of the country's overall oil imports.
The revelation serves as a double-edged sword for the European Union.
As the bloc needs alternative sources of fuel after it cut off direct flows from Russia, India easily fills this role. However, it ultimately boosts demand for Russian oil that India will refine and send back to Europe. This translates to more profits for New Delhi and extra freight costs that Europeans will shoulder.
It also means more competition for European oil refiners with no more access to cheap Russian crude. At least one petroleum company has expressed concern about where Europe's diesel is coming from.
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Josu Jon Imaz, the CEO of Spanish oil company Repsol, alleged that Russian diesel is entering Europe illegally. He clarified, however, that he does not pertain to the diesel refined by India.
Imaz called on Spanish authorities to clamp down on the activity. In response, a government official said authorities did not find evidence of the Repsol CEO's claims. Nevertheless, the official remarked that a probe on the matter is ongoing.
New deal bolsters Russian oil shipments to India
Prior to the Russia-Ukraine war in February 2022, more than half of Moscow's seaborne oil shipments were to the EU and the Group of Seven (G7) nations. However, the bloc slashed purchases of Russian crude in retaliation against Russia's special military operation.
Later in December 2022, the EU barred almost any seaborne crude oil imports from Russia. Two months later in February 2023, this prohibition was expanded to include refined fuels.
However, these bans did not prevent countries like India from purchasing discounted Russian crude. Capitalizing on the cheap oils, India then refined these into diesel and other fuels and sold them back to Europe at a markup.
A deal signed by two oil companies from India and Russia will only bolster European imports of fuel. New Delhi will rake in huge profits for the crude oil it refined into fuels, while Moscow can bypass import bans and price caps for its petroleum products. While this serves as a win-win situation for both countries, it essentially renders the EU dependent on India for energy.
Rosneft CEO Igor Sechin said in a March 29 statement that his company signed a deal with the Indian Oil Corporation Limited. Under the deal, the state-owned Rosneft will "substantially increase oil supplies as well [as] diversify the grades to India." Sechin did not specify the volumes or the value of the oil supplies it agreed upon with the Indian firm. (Related: Russia to increase oil supplies to India under new deal.)
Representatives for both companies also discussed the "possibilities of making payments in national currencies," namely the Indian rupee and the Russian ruble. The announcement of the deal followed Russian Deputy Prime Minister Alexander Novak's proclamation that Moscow's oil sales to New Delhi had surged more than 20-fold in 2022.
Watch former National Economic Council Director Larry Kudlow's remark that Russia's oil production is at pre-February 2022 levels because of China and India.
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US-EU price cap on Russian oil threatens India's crude imports and economic growth.
Russia to shift 75-80% of oil exports to "friendly" nations.
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