All the latest putinate between Russia and India on oil and money
Russia would like to sell large quantities of oil at a discount to India, but there are technical issues in the refineries that could restrict trade. All the details
According to Bloomberg sources, Russia is offering India supplies of oil at a discounted price to respond to the boycott of its barrels by countries such as the United States, Canada, the United Kingdom and Australia, which have imposed an import ban following the invasion of Ukraine.
THE OPPOSITE DIRECTION OF INDIA OVER RUSSIA
India, on the other hand, not only has not joined the sanctions against Russia, but is trying to take advantage of Moscow's moment of economic isolation to expand into the Russian market. And to buy oil – it is one of the largest importers in the world, the second in Asia after China – at low cost.
RUSSIAN CRUDE SEED AT A DISCOUNTED PRICE
Currently, India buys very little oil from Russia: about 2-3 percent of the total. However, things could change, at least for the moment, as Moscow is offering its Urals variety crude to New Delhi at a discount of about $ 35 compared to pre-war values. To make a comparison, the Brent contract (the crude oil used as an international reference) for the month of May is trading at more than 109 dollars a barrel. Considering – writes Bloomberg – that since the beginning of the war in Ukraine the prices of Brent have increased by about 10 dollars, the gap with the Urals, and the convenience of the latter, is even greater.
15 MILLION BARRELS TO START
Russia wants India to buy 15 million barrels of crude oil to begin with. Aside from New Delhi, another major Asian buyer of Russian oil in recent weeks has been China.
The Russian state oil company Rosneft and, on the other hand, the government company Indian Oil Corporation, the country's largest oil refiner, are expected to participate in the transaction. The Indian Oil Corporation has a contract – which, Bloomberg notes, is rarely used – for nearly 15 million barrels of crude oil per year.
The oil should be shipped from the port of Vladivostok in eastern Russia to avoid transit through the Baltic Sea. It would reach Indian refineries on the country's east coast in about twenty days.
THE LIMITS OF THE RUSSIAN-INDIA ENERGY COOPERATION
While India has bought almost all the crude oil it consumes from abroad, Russian oil has so far bought very little. As mentioned, the barrels from Moscow are worth 2-3 percent of the total.
As a result, Indian refineries are not programmed to process Urals crude, so it is unlikely that New Delhi will be able to purchase huge quantities of it.
Rather, India has an interest in boosting exports to Russia of medicines, chemicals and mechanical components, to rebalance the trade balance that hangs on the Moscow side.
THE RUBLI-RUPIE MECHANISM AND THE ANTI-SWIFT
To further facilitate trade with India, Russia has offered the country a rubles-rupee exchange mechanism (their respective national currencies) using the SPFS, the financial messaging system developed by the Russian central bank. It is, in essence, an alternative to SWIFT, the international standard from which part of the Russian banking institutions have been ousted. The SPFS is currently very little widespread worldwide.
The mechanism provides for the deposit of rubles in an Indian bank, which will convert them into rupees; the same will happen in reverse. It is not yet clear whether the exchange rate will be fixed or floating. India and Russia are likely to discuss it today: Russian Foreign Minister Sergei Lavrov will arrive in the country for a two-day visit.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/russia-india-petrolio-sconto/ on Thu, 31 Mar 2022 10:35:09 +0000.