EU will go easy on Indian resale of Russian fuel
Western pledges t o prevent the circumvention of anti-russian sanctions risk falling flat in India. Fuelled by cheap imports from Moscow, the Asian country’s yearly oil products sales to Europe have surged over 70 per cent to $15 billion in the past year, according to data from the Indian Ministry of Commerce.
The trend shows trade restrictions are not watertight. And the Group of Seven vowed on Friday to plug sanctions loopholes. Yet, the risk of an energy inflation resurgence makes a European Union ban on Russian oil reselling a tough call.
The war in Ukraine has offered India an opportunity to boost purchases of discounted Russian oil. Crude imports from the sanctions-hit country jumped to $31 billion during the twelve months to March from just $2.5 billion in the previous year, Indian government data show.
Procured at a few dollars below a G7 price cap of $60 a barrel imposed in December, part of Russia’s Urals crude consignments has been used for Indian domestic consumption and helped cool inflation.
The rest is being refined and shipped on as diesel and jet fuel to the West, providing a loophole for efforts to choke off Russia’s oil proceeds.
European imports of oil derivatives jumped to 200,000 bpd after the EU banned Russian crude products imports on February 5 from 154,000 barrels previously.
Sensing a growing problem, the EU’S top diplomat Josep Borrell has called for a crackdown on such exports. That would be taxing for private refiners including billionaire Mukesh Ambani’s Reliance Industries and Rosneft-backed Nayara, which accounted for 60 per cent of Indian oil imports from Russia in January, Vortexa energy flow data show.
However, enforcing a full-blown embargo, which requires unanimous support from all 27 EU states, would be hard. Refineries typically blend a basket of crudes from different sources before processing, making it difficult to identify the origins of each barrel.
And New Delhi argues oil products substantially transformed in a third country cannot be subject to EU sanctions.
To avoid an open clash with India, the EU could try to target European companies buying Russianorigin refined oil. But Brussels will be also mindful that inflation in its core euro area remains sticky at 7 per cent: diverting crude shipments away from the bloc could reignite a painful energy crisis. In striving to weaken Russia, Europe is likely to avoid a crude approach.