Business Standard

Russian crude traders come up with ways to sidestep US sanctions

- S DINAKAR Amritsar, 20 February

Russian traders are exploring options to circumvent US’ secondary sanctions on Russian crude oil which aim to disrupt the burgeoning oil trade between India and Russia, according to officials from both countries and ship-tracking data. External Affairs Minister S Jaishankar, speaking in Munich this week, reaffirmed India’s stand on buying Russian oil for energy security. Also, Oil Secretary Pankaj Jain told reporters in Goa that while Russian barrels are not sanctioned, India cannot purchase shipments delivered on vessels that have come under scrutiny. Indian refining officials told Business Standard that banks object to paying for cargoes delivered on sanctioned vessels.

Washington, Indian officials said, has exploited this vulnerabil­ity by targeting vessels supplying crude to India, forcing participan­ts in the trade, such as shippers, insurers, and notably Indian banks with operations in Washington and dealing in US dollars, to reassess their operations to process Russian trade flows.

India is not the only country staring down Washington’s sanction barrel. Mounting trade barriers are beginning to affect oil supplies and Russia's economic relations with Türkiye, the United Arab Emirates, and to a lesser extent, China, according to industry officials.

“While the US has every interest in discouragi­ng India-russia bilateral trade ties, and will use the threat of secondary sanctions, it is not likely that the logic of ever-closer trade relations between the two BRICS partners can be thwarted by the Joe Biden administra­tion easily,” said Tilak Doshi, Londonbase­d energy expert.

A Russian consulate official stated that Russian oil supplies to India will continue unhindered, and suppliers will devise ways to evade secondary sanctions.

The latest US sanctions target shipping companies. In late December, Dubai-based Sun Ship Management, a major shipper of major Russian grades like Urals and Sokol to India on over 50 vessels in the past year, was sanctioned. The Sun Ship fleet has special ice-class vessels, required to transport a light, sweet premium grade like Sokol from Sakhalin-1 project, subject to extreme weather conditions, and in which staterun explorer ONGC has a 20 per cent stake. Sokol, which is used by refiners to blend with comparativ­ely heavier, higher sulphur Urals to make it more palatable in Indian refineries, constitute­d around 8 per cent of India’s Russian crude purchases in 2023. Urals make up over 70 per cent.

These secondary sanctions target ships carrying a variety of Russian crudes, led by higher-priced grades like Sokol and cheaper Urals.

Russian traders are now seeking ways to counter these sanctions, according to refining officials. One such method adopted by Rosneft to supply the Sokol grade, which may also be used to ship Urals, is the use of non-sanctioned carriers for the final leg of the journey to Indian ports. Two Mumbaibase­d refining officials stated that banks typically examine the ship that discharges the cargoes at the Indian port and do not investigat­e all the ships that transporte­d the fuel from Russia.

Rosneft managed to send three Sokol cargoes totaling 2.1 million barrels of oil this month to be discharged at Vadinar, Mumbai, and Visakhapat­nam ports; two more may be delivered at the end of February at Visakhapat­nam and Jamnagar.

Volumes still lag the 5 million barrels of Sokol received by Indian Oil in November but are a significan­t increase from none in December and January when 10 Sokol-laden vessels, most owned by Sun Ship, had to turn back en route to India following fresh US sanctions. None of the Sun Ship vessels are now directly delivering Sokol cargoes to India, according to refining officials. Sun Ship, Rosneft, and Indian Oil did not respond to queries.

“There are several STS (ship-to-ship) transfers happening,” said Viktor Katona, an analyst for Kpler. “STS is not necessaril­y a violation of sanctions but might indicate one,” he added.

STS transfers can also be an optimisati­on of routes for sanctioned vessels, Katona said, with clean drops to the destinatio­n.

For instance, Stealth Maritimeow­ned Jaguar delivered a Sokol parcel on February 5 at Vadinar after receiving the crude from a Sun Ship-owned iceclass tanker Viktor Titov at a ship-toship transfer point in Yeosu in South Korea, according to Kpler. Leah Shipping-owned Seagull discharged a Sokol cargo at Mumbai on February 13, after loading at Yeosu STS oil from the Sun Ship-owned Yuri Senkevich. Similarly, Rani, owned by Grand Maritime, delivered a Sokol cargo to Visakhapat­nam this week, after receiving the cargo from Pavel Chernysh, another Sun Ship tanker.

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