The difficulty of circumventing sanctions and sending oil outside the aggressor country is increasing.
Russia is cutting oil supplies to India due to payment problems - Indians want to pay in rupees, which the Russians do not need. Problems for Russian oil exports may also arise due to the fact that the United States has seriously taken on transport companies that transport Russian oil bypassing Western sanctions. “Apostrophe” found out whether this would lead to a collapse in oil supplies from the Russian Federation to the world market, as well as to a reduction in the income that the aggressor country sends to the war against Ukraine.
Oil in exchange for ships
Russia is experiencing problems with the supply of its oil to India, or, more precisely, with receiving payment for it.
Due to sanctions, it is difficult for the aggressor country to conduct international payments in hard currency, which today have fallen to less than 10%. Therefore, we need other payment options that will ultimately allow us to get the same hard currency. Well, or, at worst, Chinese yuan.
However, India is ready to pay for Russian oil in rupees. But this is not profitable for the Russian Federation, since it has nothing to spend it on - after all, imports from India are significantly less than Russian exports to this country. But Russian companies cannot withdraw this currency, although not freely convertible, from accounts in Indian banks.
Back in August, Vice-Speaker of the Russian State Duma Vladislav Davankov proposed organizing free tours to India for compatriots and thus finding a use for the rupees received as payment for the supplied oil that were stuck in bank accounts. But, apparently, this initiative did not find support, and, frankly speaking, even if they decided to implement it, then in order to spend all the suspended funds, they would probably have to bring the entire population of the Russian Federation to India, and maybe not even once.
Therefore, the problem persists, especially since oil supplies from Russia to India continue, while the parties have not yet agreed on the currency in which payments will be made.
As Reuters reports, citing sources, the Central Bank of the Russian Federation has given Russian oil companies an informal instruction not to accept rupees for payment.
At the same time, the Russians are blackmailing Indians by allegedly redirecting millions of tons of oil to other countries if New Delhi continues to insist on payment in Indian currency.
In August, the parties reached a temporary compromise, as a result of which payment was made using a currency basket of the Chinese yuan, Hong Kong dollar and UAE dirham. However, since October, some Emirati banks, fearing Western sanctions, have tightened control over transactions that may be related to Russia, and therefore the dirham as a currency of settlements between the Russian Federation and India is also under big question.
Russia has similar problems with other countries, but India, after the Russian invasion of Ukraine and the imposition of sanctions in connection with it, has become the second buyer of Russian oil after China. Despite the fact that India has reduced imports from Russia in recent months, this country still accounts for more than 60% of all seaborne supplies of Russian oil.
Obviously, the aggressor country has no plans to lose such a large buyer.
Therefore, Russia will continue to supply oil to India, while simultaneously looking for payment options acceptable to both parties.
“There will certainly be a temporary decrease in purchases. Whether India becomes third or fourth (in terms of volume of purchases of Russian oil) is not important. I think the purchases will continue,” Mikhail Gonchar, president of the Strategy XXI center for global studies, told Apostrophe.
According to him, India will continue to insist on paying for Russian oil in rupees, and the Russian Federation will have to take this into account, since it needs, one way or another, to sell its oil.
“Now we are talking about the fact that in order to somehow accommodate this rupee mass, 24 river-sea class vessels will be built in India by order of Russia for use in the Caspian Sea. The contract runs until 2027, and these ships will be built for those rupees (which were paid for oil supplies), and this will be a way out of the situation. The issue of joint construction (of ships) for the Arctic region is also currently being discussed,” Gonchar said.
At the same time, what is important, money from the sale of oil to India will not go into the Russian budget: “The Russians need money now, for the war budget, but you can’t put a rupee there. That’s why they are forced to go through such lengthy schemes.”
Shadow fight
However, it is quite possible that there will soon be an even greater reduction in Russian oil supplies. And not only to India. This is due to the fact that the United States decided to tighten control over companies that transport Russian oil sold above the price ceiling established by sanctions at $60 per barrel.
The United States is interested in both legal carriers and those who use tankers from the so-called “shadow fleet,” which was created at the command of the Kremlin precisely in order to circumvent price sanctions.
According to Reuters, the United States is conducting relevant investigations into about three dozen carriers.
In addition, it became known that three large Greek tanker companies - Minerva Marine, Thenamaris and TMS Tankers - refused to transport Russian oil due to fear of sanctions. These companies collectively control about 100 tankers, which are capable of handling almost all Russian export oil from the western ports of the Russian Federation on the Baltic and Black Seas.
In addition to carriers, the United States has also become interested in companies that insure maritime supplies of Russian oil.
These events could lead to a significant reduction in Russian oil exports. At the very least, Russian companies are already faced with a shortage of vessels to transship their oil.
According to Mikhail Gonchar, now the time has truly come for carriers who continue to transport Russian oil in circumvention of sanctions.
“They don't want to be repressed by the United States and other Western countries. But a situation may well arise that today, for example, these are Greek tankers, according to the flag, but then, suddenly, they will cease to be Greek and begin to sail under some other flags, says the expert. – Hypothetically, China or India could provide their flags as part of the agreements. However, despite the great interest in receiving cheap sanctioned oil, it is difficult to imagine that India and China will go into open confrontation with Western countries over the sanctions regimes. Therefore, this is a hypothetical scenario. But, let’s say, such an option exists. Maybe, for example, it will be possible to persuade the Indians, but at a discount of, say, 50%. And in rupees."
However, in any case, tightening control over compliance with sanctions will not undermine Russia’s export potential, says Gennady Ryabtsev, head of special projects at the Psyche scientific and technical center.
“There is no embargo on Russian oil supplies. There are restrictions on the ability to use the services of insurance and transport companies registered in London, Amsterdam, Rotterdam and Antwerp. If a tanker is insured, for example, by Lloyd’s (one of the world’s largest corporations in the insurance market, based in London), then it is prohibited if the contract value is above $60 (per barrel),” the expert said in a conversation with Apostrophe.
Therefore, he noted, the current activation of the Americans, as well as the British and the European Commission, is aimed not at stopping the supply of Russian oil, but at ensuring that Russia does not circumvent the previously imposed sanctions: “Unfortunately for Ukraine, banning the supply of Russian oil to will not be possible in full."
Indeed, the West, imposing sanctions against Russian oil a year ago, hoped that it would remain on the world market so that a deficit would not arise, but at the same time the aggressor country would lose windfall income from oil exports.
“Russia has already lost its excess income - it is forced to sell its oil cheaper than it could have sold in the absence of these sanctions,” explains Gennady Ryabtsev. – After all, what does the price consist of? These are the cost of production, the cost of transshipment, transportation, freight, insurance, and payment conversion. Why is the contract price higher (than $60 per barrel)? Because because of the risks, all costs are higher.”
According to him, Western media often misinterpret data on Russian budget revenues from oil exports: “They imply the pricing mechanism that they understand. Whereas in reality, little goes to Russian oil companies” (and, accordingly, to the Russian budget – “Apostrophe”).
Thus, despite the claims of Russian propaganda, sanctions work, and they will work even better when the loopholes that allow them to be circumvented are eliminated.
“Sanctions are like a barrel (a pun is made, given that barrel is translated from English as barrel - “Apostrophe”), but this barrel has a huge number of holes. They close one, two, three, but a new leak appears,” says Ryabtsev.
In addition, he added, Western media incorrectly calculate the oil revenues of the Russian Federation: “They count them in dollars. How to convert Indian rupees to dollars? No way. But no one takes this into account, and they believe that this money is in the Russian budget. But they are not there."
Let us add on our own that the reduction in budget revenues of the aggressor country, including and even primarily from oil exports, narrows its ability to finance the war against Ukraine. And that means our victory is coming closer.
