The latest Western restrictions are expected to disrupt Moscow’s oil supply to its biggest buyers, China and India
India, the world’s third-largest oil importer, is not expecting any disruption to its oil purchases from Russia in the next two months, despite the latest US and UK measures against Moscow’s energy sector. A senior government official told Reuters on Monday that US-sanctioned tankers are permitted to discharge crude until March.
“The market is waiting for Russia to respond on sanctions. Russia will find ways to reach us,” the unnamed official was quoted by Reuters as saying.
India and the world’s largest oil consumer, China, are now “scouring the globe for supplies of crude” as they brace for interruptions in deliveries from Moscow.
Bloomberg and Reuters reported on Monday that Chinese and Indian refineries are assessing the impact of the new sanctions and weighing options to source crude from West Asia, the Americas and Africa.
Beijing on Monday reiterated its opposition to US unilateral sanctions. Foreign Ministry spokesperson Guo Jiakun said: “China opposes the US overstretching the concept of national security, and disrupting and restricting normal economic and trade exchanges,” adding that Beijing stands against “illegal unilateral sanctions and long-arm jurisdiction that lack basis in international law.”
Sweeping measures by the US Treasury Department and UK government, announced on Friday and labeled as most stringent to date, targeted two major Russian petroleum producers – Gazprom Neft and Surgutneftegaz – along with associated entities, and include restrictions on 183 vessels involved in transporting Russian crude oil.
Moscow, reacting to the move, said it “represents an attempt to inflict damage on the Russian economy at any cost, even at the risk of destabilising global markets.”
The new sanctions have caused a spike in crude prices, with a potential impact on economies worldwide, but particularly on India and China, due to their reliance on imported oil. The global crude benchmark Brent rose beyond $81 a barrel on Monday, following a nearly 4% increase in the previous session.
Citigroup has estimated that up to 30% of Russia’s so-called “shadow fleet” of tankers could be impacted, potentially disrupting as much as 800,000 barrels per day. However, the actual loss might be less than half of that amount, it added. Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd, told Bloomberg that “Russian oil could leach into global supplies despite the sanctions – a move that has been re-run many times.”
Goldman Sachs has maintained its outlook for Russian oil supply, suggesting that lower prices could incentivize continued buying.
