Russian crude being shipped to India under G7 price cap

Russian crude being shipped to India under G7 price cap

Russian crude oil is being shipped to India on tankers insured by western companies, in the first sign Moscow has reneged on its vow to block sales under the G7-imposed price cap.

At least seven Russian crude oil cargoes have been loaded on to western-insured tankers since the price cap started on December 5, according to Financial Times analysis of shipping and insurance records, despite President Vladimir Putin’s claim that Moscow would not deal with any country observing the cap.

Under the cap introduced this month, buyers of Russian crude oil can only access western services such as insurance and broking, which are the bedrock of the global seaborne trade in oil, if they attest that they have paid less than $60 a barrel.

If Moscow is willing to let buyers ship its heavily discounted crude on western-insured tankers to markets in Asia, it may ease industry concerns about shortages in the new year.

The FT identified the seven tankers using data on cargo from Kpler, a freight data and analytics company. It only includes vessels where there is high confidence that they are shipping crude oil that has not come from Kazakhstan, which shares export infrastructure with Russia.

The FT has also verified that they still have current insurance coverage from a western insurer. Two vessels reorganised their insurance in the past week, making changes that allowed them to engage in the trade.

Essential, the Singaporean operator of the Ruby Phoenix, one of the seven vessels, said: “We have from our counterparts the necessary attestation that the cargo in question complies with the price cap regulations.”

The owners of the other six ships did not respond to requests for comment.

The seven tankers, which in total are carrying about 5mn barrels of crude and departed from Russia’s Baltic ports, have listed their destinations as refineries in India, which has become one of the largest buyers of Russian oil since Moscow’s full-scale invasion of Ukraine in February.

Indian refiners Reliance and Bharat Petroleum Corporation Limited, which shipping data suggest are buyers of some of the cargoes, did not respond to requests for comment.

The G7 price cap was designed to keep Russian oil flowing to avert supply shortages, but at a price of $60 a barrel or lower in order to squeeze the Kremlin’s revenues.

Putin said last week Russia “would simply not sell to the countries” that supported the price cap and indicated Moscow could retaliate by cutting production as it has done with natural gas supplies to Europe.

The Kremlin said on Thursday that Putin planned to sign a decree in the coming days setting out Russia’s response to the price cap. The Kremlin did not respond to requests for comment from the FT on the existing shipments.

Putin has acknowledged that most Russian oil was already trading at or below $60 a barrel, saying “the ceiling they have suggested is in line with the prices we are selling at today”.

One western official said the initial signs were “promising” and suggested the price cap was largely working as hoped.

Another western official said they were confident they had seen a similar number of sales made under the terms of the cap since December 5 as the FT, and that they expected the volume to increase as buyers became more confident in how the cap worked.

The true figure may be higher: the FT has identified a further three vessels with western insurance carrying 1.6mn barrels of Russian oil, but where there is less certainty about whether the cargo is covered by the cap.

The cap currently only applies to crude oil. A similar mechanism for refined products such as petrol and diesel takes effect from February.

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Russia has assembled a “shadow fleet” of about 100 tankers to circumvent western restrictions, but traders and shipbrokers believe the country is still short of vessels to maintain export volumes.

Russian crude oil has traded at steep discounts since shortly after Moscow’s full-scale invasion of Ukraine, when many western buyers avoided it. The discount has increased since December 5; on that day, alongside the price cap, most European refiners were banned from buying seaborne Russian crude.

Urals, the main oil grade shipped from Russia’s western ports, is trading at about $42 to $45 a barrel compared with $82 a barrel for Brent crude, the international benchmark, according to price reporting agency Argus.

Preliminary data suggest that since the price cap started 11 days ago Russia’s seaborne crude exports had dropped, according to Kpler and Argus.

Matthew Wright, an analyst at Kpler, said: “In the first week after the price cap, things edged down a bit and they look quite subdued in the second. But it is still too early to draw any firm conclusions about the medium-term effect.”

Vitol, the world’s largest independent oil trader, said in November it expected Russian seaborne exports to fall by as much as 1mn barrels a day, about a fifth, if it struggled to access enough tankers.

Additional reporting by Polina Ivanova in Berlin and Chloe Cornish in Mumbai

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