India's import of Russian crude oil drops in November on shrinking discounts

India became the second biggest buyer of Russian crude oil since Moscow invaded Ukraine in February 2022, with purchases rising from less than one per cent of the total oil imported to almost 40 per cent of the country's total oil purchases. The rise was primarily because the Russian crude oil was available at a discount to other internationally traded oil due to the price cap and the European nations shunning purchases from Moscow.

"India's imports of Russian crude oil dropped by a massive 55 per cent in November - the lowest figure since June 2022," the Centre for Research on Energy and Clean Air (CREA) said in its latest report. Russia remained India's top oil supplier, followed by Iraq and Saudi Arabia.

In November, there was a 17 per cent month-on-month increase in the discount on Russia's Urals grade crude oil to an average of $6.01 per barrel compared to Brent crude oil. The discount on the ESPO grade narrowed by a massive 15 per cent and was traded at an average discount of $3.88 per barrel while that on the Sokol blend narrowed by 2 per cent to $6.65 per barrel, it said. Russia predominantly sells ESPO and Sokol grades of crude oil to India. All fossil fuels taken together, "India dropped to third in the list of largest buyers of Russian fossil fuels in November, contributing 17 per cent (EUR 2.1 billion) to Russia's monthly export earnings from its top five importers. There was a significant 22 per cent drop in Russian revenues from crude oil exports to India in November," it said.

In an attempt to restrict funds for Russia's war machine, The Group of Seven (G7) rich nations, the European Union and Australia put an embargo on Russian crude and introduced a $60 per barrel price cap in December 2022. Over the next 12 months, the price cap and embargo had a significant impact on revenues, and forced Russia to find new markets and ways to transport its oil. Russia did this by offering deep discounts on its Urals grade crude....

Since the sanctions, Russia has lost an estimated €14.6 billion in revenues from Urals grade crude exports," the report said. In the second year of the sanctions, CREA estimates that sanctions impacted Russian Urals crude revenues by 10 per cent resulting in losses of €4 billion. This impact was felt heavily for the first half of 2024 when Russian revenues were hit by €2.5 billion.

"The price cap has had an impact but has failed to live up to its potential. A lack of enforcement and desire to lower the price cap has meant Russia has found a way to circumvent the cap and find new markets as time has gone by, especially in the second year of the sanctions," it said. In the first year of the sanctions Russia was losing, on an average, 23 per cent of its Urals crude export revenues every month due to the price cap and embargo. This figure has fallen sharply to a mere monthly average of 9 per cent in the second year of the cap. The impact has reduced steadily through 2024 - the effect on revenues in October was 63 per cent lower than that in January.

"As Russia has built a network of 'shadow' tankers, it can trade its oil above the cap to new markets in non-sanctioning countries," CREA added.