Macro

India Continues Russian Oil Imports Amid G7 Cap, US Notes

US clarifies stance on India's Russian oil imports, aims to cut Putin's revenue without global energy supply shocks.

By Athena Xu

4/4, 07:43 EDT
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Key Takeaway

  • US acknowledges India's continued import of Russian oil, emphasizing it prevents supply shocks amidst Ukraine conflict.
  • Despite G7's $60-a-barrel price cap on Russian crude, India boosts imports, making Russia its top supplier.
  • Russian oil remains cheaper for India, with a significant discount compared to global prices, despite sanctions.

US-India-Russia Oil Dynamics

The US Treasury Assistant Secretary for Economic Policy, Eric Van Nostrand, clarified at an event in New Delhi that the US never anticipated India to cease importing Russian oil. The primary goal of the sanctions regime, according to Van Nostrand, is to diminish Putin's revenue without causing supply shocks in the global energy market. This stance comes amidst the backdrop of the Group of Seven's strategy to cap Russian crude prices at $60 a barrel, a measure aimed at restricting Russia's oil revenue while allowing global trade flows to continue.

Russian Oil's Growing Influence in India

Despite the imposition of Western sanctions and the ongoing conflict in Ukraine, Russia has emerged as India's top oil supplier. This shift is marked by a significant increase in India's oil imports from Russia, reaching the highest levels in four months as of March. The adaptation of Russian producers to sanctions, through the utilization of a "shadow fleet" of tankers, has played a crucial role in sustaining and even doubling Russia's oil and gas tax revenue in March compared to the previous year.

Price Dynamics and Sanction Impacts

Russian Urals crude has been trading at a substantial discount to global prices, making it an attractive option for Indian refiners. This price competitiveness, coupled with the challenges posed by sanctions, has led to a diversification of India's oil import sources. Notably, there has been an uptick in India's procurement of US oil, as sanctions have narrowed the discounts on Russian crude and complicated trade flows. The enforcement of sanctions has also impacted the trade of specific Russian crude varieties, such as Sokol, prompting Indian refiners to seek alternatives.

Management Quotes

  • Eric Van Nostrand, US Treasury Assistant Secretary for Economic Policy:

    "What the sanction regime intends to do is to reduce Putin’s revenue. Russian oil will no longer be the same product once processed in refineries, and therefore not a target for penalties."

  • Anna Morris, US Acting Assistant Secretary for Terrorist Financing:

    "Russia will react to an effective price cap by continuing to invest money to avoid our sanctions, requiring us to continue to adapt and innovate in our strategy."