India not asked to reduce its imports of Russian crude oil, says US

India has not been urged to reduce its imports of Russian crude oil, with senior officials from the US Department of the Treasury emphasising a desire to see Russia offer higher negotiated discounts to buyers, they said on Thursday. Additionally, they highlighted that Indian buyers can procure Russian crude above the $60 per barrel price cap if they opt out of Western shipping and maritime services.

Speaking to journalists at the Ananta Aspen Centre in Delhi, Anna Morris, assistant secretary for terrorist financing and financial crimes, and Eric Van Nostrand, assistant secretary for economic policy of the US Department of the Treasury, explained that the existing price cap regime aims to limit Russia’s ability to sell oil at inflated prices.

“Effectively, the price cap is designed to compel Russia to continue selling its oil, but at lower prices than it could otherwise command,” Nostrand said. He added that it also seeks to foster a market where global buyers can generally secure better deals from Moscow.

What US Treasury department officials said

*  Goal is to force Russia to sell oil at cheaper prices regardless of who is buying it

*  Want to see Russia continue giving higher negotiated discounts to buyers

*  Happy that price cap is forcing Russia President Vladimir Putin to invest in oil tankers and not tanks

*  Non-G7 nations free to buy Russian oil above $60-cap without using Western shipping, insurance services

*  No Indian company has violated sanctions so far

 

Since December 5, 2022, the Group of Seven (G7) nations — the US, Canada, France, Germany, Italy, Japan, and the UK — have prohibited Western shipping and insurance companies from engaging in transactions involving Russian crude sold at or above a $60 per barrel cap. This measure was implemented concurrently with a separate ban on Russian seaborne crude and refined shipments by European Union (EU) nations.

According to estimates by the London-based commodity data analytics provider Vortexa, which tracks ship movements to gauge imports, Russia remained the single-largest supplier of crude oil for the 18th consecutive month as of March.

Imports from Russia increased by 7 per cent month-on-month in March, reaching 1.36 million barrels of crude per day compared to February.

Analysts had previously anticipated reduced imports from Russia following fresh sanctions imposed by the US against Russia’s leading tanker group, Sovcomflot, on February 23. These sanctions, announced on the second anniversary of Russia’s invasion of Ukraine, targeted 14 tankers within the fleet.

 

Forcing Russia’s hand

The price cap has compelled Russia to divert funds from the battlefield towards developing its oil marketing infrastructure, effectively pressuring Moscow to prioritise oil tankers over tanks, Morris said.

“In the second half of 2023, we observed Russian efforts to build up an infrastructure of ships, insurers, and other maritime services with providers with opaque ownership structures and a history of sanctions evasion activities, sometimes colloquially known as the shadow fleet,” Morris said.

She emphasised that the US will continue working to increase the costs for Russia to operate outside the price cap and to ensure that oil is not deceptively traded below the price cap.

Russia has seen a 40 per cent decline in receipts from oil exports for most of 2023, she noted.

 

India in the clear

Both officials also clarified that India can continue sourcing Russian crude both below and above the price cap. This issue had caused confusion among Indian buyers. "

“If you are purchasing above the price cap without utilising Western services, as a matter of law, you are not obligated to comply with the price cap,” Nostrand said.

However, confusion remains regarding whether Indian banks, with operations in the US, can facilitate these transactions. Indian refiners typically pay for Russian crude in UAE dirhams.

The officials also confirmed that no Indian companies have faced sanctions for violating US sanctions thus far.

India is the second-largest oil importer globally and has consistently been the largest buyer of Russian oil since the invasion of Ukraine.

When questioned about the efficacy of the price cap, given that the US imports refined petroleum from India which may have originated as Russian crude, the officials stated that petroleum imported from India is classified as an Indian product once refined.

“Once Russian oil is refined, it is technically no longer Russian,” Morris said.

The officials are visiting New Delhi and Mumbai from April 2-5 to meet with government and private sector counterparts.

Key points from US Department of the Treasury officials

·         The US aims to pressure Russia into selling oil at cheaper prices regardless of the buyer

·         It seeks continued higher negotiated discounts from Russia for buyers

·         The US views the price cap as forcing Putin to invest in oil tankers rather than tanks

·         Non-G7 nations are free to purchase Russian oil above the $60 cap without using Western shipping or insurance services

·         No Indian company has violated sanctions to date