RUSSIAN Oil Exports to India Collapsing due to Currency Problems, Pricing Issues & Sanctions

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Following the invasion of Ukraine Russia replaced lost oil sales with increased sale to INDIA and by May 2023 India was buying over 2.2 MILLION Barrels Per Day which was almost half of Russia’s exports. However those exports have fallen significantly over the past 6 months due to payment problems surrounding CURRENCY, issues with the PRICE and increased enforcement of the SANCTIONS. Russia announced OIL PRODUCTION CUTS of 850,000 Barrels Per Day in 2023 and those cuts may be related to the loss of sales to India. In this video I provide more details of the current situation, discuss the problems that Russia is now facing and the impact on the Russian Economy.

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Chapters:
0:00 Intro
2:45 INDIAN OIL PURCHASES
6:28 CURRENCY PROBLEMS
9:38 RUSSIAN OIL PRICE
12:24 SANCTIONS
15:27 SUMMARY & CONCLUSION

#russia
#india
#sanctions
#ukraine
#opec
#uk
#pricecap
#GLOBALFINANCIALCRISIS
#RUBLE
#SWIFT
#RECESSION
#CHINA
#USA
#NATO
#WW3
#WORLDWAR3

Hi welcome back to Joe blogs in today’s episode I want to talk to you about Russian oil exports and particularly the exports to India immediately following the invasion of Ukraine Russia pivoted in terms of its customer base and to replace all of the sales that it had

Lost to the West as a result of the sanctions it started exporting huge volumes to China and India now prior to this situation India had actually bought very little oil from Russia because it didn’t make any economic sense to transport the oil over large distances when it could buy it from local

Suppliers however as a direct result of the sanctions Russia started offering huge discounts to India against the market prices and India decided that this was too good an opportunity to turn down and as it was remaining relatively neutral in terms of its stance on the war in Ukraine it decided to buy large

Volumes now Russia exports around 5 million barrels of oil per day and by the summer of 2023 India was buying over 2 million barrels per day so almost half of all of the exports however over the last 6 months Russia’s exports to India have fallen by around 30% and in December it

Was reported that there was a 22% drop in volumes and the reasons for this sudden drop in purchases by India are three-fold firstly the two countries are having problems with regards to the currency that India wants to pay in secondly there are now issues with regards to the price that Russia is

Charging India and thirdly the sanctions that are being applied by the West are starting to kick in and affect a number of the tankers that are trying to deliver this oil directly to India so in today’s video we’ll have a detailed look at the volume of trade that’s been

Taking place between India and China we’re then go on to talk about the problems with regards to the currency that India wants to pay in well then have a look at what’s been happening with the price that Russia is charging India and and how that compares to its

Competitors we’ll take a look at which tankers have been hit by sanctions and how that’s affected the deliveries and then finally today I’ll wrap up with my summary to what I think is happening to the trade between Russia and India and what the implications of this will be

For the Russian economy but before we get started on all of that once again like to say thank you so much to everybody that’s bought me a coffee recently I’ve been inundated with coffees over the last few days not sure how I’m going to find time to drink all

Of them if you start seeing me visibly sh speaking in videos at some point over the next week or so you’ll know that I’ve decided to have a big batch of coffee but anyway thank you so much to everybody that has bought me a coffee or

Sent me a YouTube super thanks or signed up as a patreon or a member I really really appreciate it India’s purchases of Russian oil have been falling since the middle of 2023 and there was a significant fall in December now if you follow the channel you won’t be surprised to hear that

Russia does not publish data with regards to how much oil it’s exporting and where it’s delivering it to however fortunately there are three major agencies that record the movement of cargo ships and the data in this table shows India’s Imports of oil from its top three suppliers which are Russia

Iraq and Saudi Arabia and the information provided here shows the number of barrels per day for November and December for three different agencies kipler vortexer and lseg now as you can see the numbers provided by the three agencies are all different because they’re making their own estimates but

If we start off with the lseg data which is shown on the far right hand side of this chart it shows that in November it was estimated that Russia exported 1.54 million barrels per day however in December that figure dropped to 1.2 million barrels per day representing a fall of

22% and you can see from the data shown underneath these figures that there was a 133% increase in the imports from Saudi Arabia and a 7% increase in the imports from Iraq the data provided by vexa show that their estimate for the Imports for December was 1.29 Million

Barrels per day representing an 18% fall month on month and that their estimate is that there was a 4% increase in the volume from Saudi Arabia and a 2% fall in the volume from Iraq and the figures on the left hand side of this chart from Kepler show that the volume reduced from

1.6 5 million barrels per day in November to 1.4 million Barrels in December which represents a fall of 16% and they’re estimating that there was an increase of 4% in the volumes from Saudi Arabia and a fall of 7% from Iraq so whilst the three sets of figures are

Different the overriding message here is that in December there was a sharp reduction in the volume of oil that India imported from Russia and this chart which has been plotted using data provided by Kepler plots India’s import volumes from Russia Iraq and Saudi Arabia dating back to January

2022 the imports from Russia are shown by the black Line Imports from Iraq are shown by the pink line and imports from Saudi Arabia are shown by the Orange Line and what this shows is that in January and February 2022 before Russia’s invasion of Ukraine started India was importing virtually

Zero oil from Russia however as the oil sanctions started to be applied against Russia by the West Russia desperately searched for new markets to sell into and offered India huge discounts on its purchases and by June 2022 Russia was the largest single supplier of oil to India and the volume

Of oil that India was buying from Russia increased from zero to 2.2 million barrels per day by May 2023 however as you can see from the right hand side of this chart since May 23 there has been a reduction in the amount of oil that India is buying from

Russia and as we’ve just discussed in December of 203 the volume fell to 1.5 million barrels per day representing a fall of more than 30% since the Peak in May and that fall of 700,000 barrels per day represents a major problem for Russia because there aren’t that many

Large markets that it can now find to be able to make those sales so why is the volume of oil that India is buying from Russia fallen so dramatically over the last 6 months well one of the problems in the trading relationship between the two countries relates to currency historically if

India was making large purchases from Russia it would have made the payments in US Dollars that’s referred to as the Petr currency everybody in the past used to use US dollar because it was the easiest point of reference for all of your currencies however obviously today

Russia does not want to be paid in US dollars because of the sanctions being applied by the west and initially Russia stated that it wanted to be paid in Rubles however the Indian authorities refused to do this they didn’t want to have to buy rubles from the Russians in

Order to pay the Russians for their oil so India set out and said we want to pay in Indian rupees but that caused the problem from Russia’s perspective because Indian rupees are not accepted by any other country in the world so if Russia continued to take payments in

Indian rupees it would basically build up a large supply of rupees which it could really only use for trade with India and unfortunately from Russia’s point of view it’s really a one-way street at the moment the vast majority of all of the trade is Russia selling fossil fuels directly to India there

Isn’t a lot that India has that Russia wants to buy and between April and September 2023 Russia sold around $30 billion worth of fossil fuels to India and only purchased around $1 billion worth of Indian exports so from Russia’s point of view they didn’t want to be

Paid in Indian rupees so we had a bit of a Mexican standoff here so as a compromise Russia asked if India could make its payments in Chinese Yuan however the Indian authorities were uncomfortable with this and so the compromised position is that Indian companies will make payments in a

Combination of Chinese Yuan and United Arab Emirates durhams because the Durham is pegged against the US dollar and therefore has a relatively stable currency however there are now major problems for Indian refiners actually making the payments because the Indian authorities have advised them that they no longer want them to make any payments

In Chinese Yuan and so all of the payments need to be made in UAE durhams but the UAE banks are now having problems with regards to the sanctions they want to check the paperwork to make sure that the deals that have been agreed between India and Russia are

Compliant with the $60 maximum price that’s been applied as a result of the oil price cap and the sanctions so the Indian refineries who are buying all of this Russian oil now find themselves in a very difficult situation because the only currency that they’re permitted to

Pay in is now coming under severe checks and restrictions and as a result of that payments haven’t been made and it’s now been reported that a lot of Russian ships are now idling in waters outside of India because the payment hasn’t been made and therefore they’re not

Authorized to Dock and unload all of their oil the main driver for the huge increase in the volume of oil that India has purchased from Russia over the last 18 months has been the price Russia was offering the lowest price in the market and as India is a very large country has

A population of over 1.4 billion people the authorities took the decision that the lowest price was the best deal in the market irrespective of what was happening in Ukraine and that India would buy as much as they could however it’s now been reported that Iraq has started to undercut the price that

Russia is offering to India and as a result of that the volume of oil that India is buying from Russia has fallen this chart shows the price per barrel that India has been paying for its oil imports from Russia Saudi Arabia and Iraq and the color coding here the black

Lines shows the price for Russia the pink line shows the price from Saudi Arabia and the Orange Line shows the price from Iraq and what this shows is that back in March 22 so shortly after Russia’s invasion of Ukraine Russia was selling oil to India at $118 per barrel

Saudi Arabia was selling for $104 and Iraq $96 so at that point Russia was the most expensive out of the three however as you can see in April 22 Russia lowered its price significantly and between April 2022 and June 2023 Russia offered the lowest price in virtually every single month however if

You look at what’s been happening since July 2023 you can see that the orange and the black lines are virtually identical so Russia is no longer offering a discount compared with Iraqi oil and as we saw earlier in the video over that same period the volume of oil that India has

Been buying from Russia has fallen significantly from around 2.2 million barrels per day to 1.5 million and I think one of the key points to note here is that since July 2023 the price that India has been paying has been above the $60 price cap that was imposed by the

West and as a result of that all of those deliveries are potentially subject to sanctions now obviously the way the sanctions operate they can only be controlled if the oil is being moved by ships that are either owned or insured directly by the West so if India is

Receiving deliveries on ships that are owned either by Russia or countries that are not part of the sanctions then that’s fine but if those deliveries are being moved on ships that are potentially subject to sanctions then that exposes India to problems and potentially explains why there has been

A dramatic fall in the volume that India is buying so as we’ve just discussed the main way that the West is policing its sanctions against Russia is through either the ownership or the insurance of the ships that are transporting the oil and these two charts show the percentage of ships

That are either owned or insured by the West that Russia is using for deliveries of crude oil in the top chart and refined oil products in the bottom chart and the key section on both of these charts is the blue section at the bottom which shows those ships owned and

Insured by the EU and the G7 and if we start off by looking at the crude oil chart at the top you can see that prior to Russia’s invasion of Ukraine around 65% of all of the ships were owned or insured by the EU and the G7 and a

Further 15% were owned by Norway which is also applying sanctions against Russia however over the last two years that situation has changed materially and only around 30% of all of the ships that Russia is using for its crude oil deliveries are now owned by countries that are applying sanctions against it

If we now look at the situation for refined oil products you can see that it’s quite different prior to Russia’s Invasion around 90% of all of the ships it was using were supplied either by the EU the G7 or Norway and whilst there has been a reduction over the last 2 years

The reduction hasn’t been as significant as it has been for crude oil and Russia is still using Western ships for around 60% of all of its deliveries so the overall takeaway of these two charts is that around 60% of all of the refined oil deliveries and 30% of all of the

Crude oil deliveries are still potentially subject to sanctions and the oil price cap that’s been imposed by the West over the last few months the USA has ramped up its policing of the sanctions and particularly the oil price cap and a variety of oil trading businesses have now been hit with formal

Sanctions Bellatrix energy limited Hong Kong based oil trading business which handled around 20% of all of Russia’s exports was recently sanctioned alongside two other Hong Kong based trading companies volton and covart and a UAE based shipping company called sunship management and this table details six tankers that are loaded with

Russian oil all of whom have been hit with sanctions as a result of potentially trading above the oil price cap and what this shows is that as soon as the sanctions are applied against these tankers the ports will not allow them to Dock and unload their cargo

Because they don’t want to to be hit with the penalties so you can see that the NS Century the NS commander and sackin Island were all due to unload at the Indian Port of vadinar however as the cargo has now been sanctioned all three of these ships are now idling

South of Sri Lanka and have just been hanging around in the waters full of oil and the same applies to the other three tankers that were all due to deliver oil to the port of paradip on India’s East Coast so what’s the summ and conclusion today well I wanted to post this video

Because I think what’s happening in the trade between India and Russia right now is really interesting over the last 12 months or so we’ve all got very comfortable with the concept that Russia has managed to divert a lot of the sales that it was previously selling to the

West to India and China and the situation looked like it got to a nice equilibrium from Russia’s point of view they’d managed to find those markets job done however as we’ve seen from the data in today’s video over the last 6 months India’s purchases from Russia have fallen significantly in May 20203 Russia

Was purchasing 2.2 million barrels of oil per day that is a lot of oil however by December 23 that was down to 1.5 million that’s a fall of 700,000 barrels of oil per day that is a massive volume of sales for Russia to lose on an annualized basis that would

Be more than 250 million barrels and at an average price of around $80 that equates to more than $20 billion of lost Revenue so we’re talking a serious chunk of change here but the bigger issue from Russia’s point of view is that there isn’t really another massive market for

Them to be able to go after if they lose these sales to India permanently there isn’t really anywhere to go and this could really explain why Russia has been cutting its production over the last 6 months if you’ve been following the channel you’ll know that Russia has announced on three separate occasions

That it’s reducing the amount of oil that it’s producing and in total that reduction equates to 850,000 barrels per day which isn’t far away from the 700,000 barrels per day of sales that they’ve lost to India so whilst Russia has said that they’re doing this in

Order to keep the price of oil up and to support OPEC Plus actually what it could reflect is that it’s struggling to be able to get those sales and now that it’s lost the sales to India it’s needing to cut back in its production because as we’ve discussed previously

Russia doesn’t have anywhere to store this oil it doesn’t have large tanks or underground cavens to be able to put it so if it can’t make the sales at some point Russia will need to stop the production because it’s going to be swamped with oil otherwise so the key

Question from today’s video is why has India stopped making those purchases and as we’ve discussed there are three reasons the first reason relates to currency India initially wanted to make all of its payments in Indian rupees it’s its currency so therefore it wanted to support it Russia didn’t want to take

Payment in Indian rupees because no other country in the world deals in it and therefore if it builds up a huge amount of rupees it’s going to have a problem in terms of spending them so as a result Russia asked if India would pay in rubles in India refused and as a

Compromised position the Chinese Yuan was used primarily however the Indian authorities didn’t want to keep supporting the Chinese Yuan and so the refiners were told that they couldn’t make any payments in Yuan and that they had to use UAE durhams and the problem that’s now transpiring from using UAE

Durhams is that the UAE banking system is concerned about the sanctions and so they’re wanting to check paperwork to make sure that these deliveries are all compliant with the $60 price cap obviously these deliveries aren’t all compliant as we’ve seen from the data we saw that Russia is selling for around

$80 to India and that’s now causing problems and we’re seeing ships idling off the coast of India so the currency issue is causing major problems in addition to that we’ve also seen that Russia has started to increase its prices and the current price is above the $60 price cap and that’s now causing

Concern in India and as a result of that Iran has started to sell a lot more into India and the price differential between Iraq and Russia is virtually zero now and from India’s point of view there is less risk in buying that Iraqi oil than there is in buying the Russian oil and

As a result of that the purchases from Russia have fallen and in addition to those two factors we’ve also seen that the USA particularly has ramped up the application of the sanctions against all of the companies that are shipping oil from Russia to places like India and those companies are now coming under

Scrutiny and as a result of that some of these ships are now being held off the ports which is holding up the deliveries to India and from India’s point of view if that’s going to happen they would obviously prefer to deal with somebody else who can deliver all of this oil

When it’s actually needed from India’s perspective so as a result of the three different factors that we’ve talked about in today’s video India has reduced the amount of oil that it’s purchasing from Russia and this poses a major problem from Russia’s point of view because as we’ve just discussed there

Isn’t really anywhere else for them to go there are no other major markets available to Russia and therefore if it can’t replace the sales that it’s lost to India Russia will have to cut back on its production and one of the problems that that presents is that oil doesn’t

Like to have its flows restricted once oil starts flowing out of the ground the last thing that you want to do if you’ve got a production facility is try to reduce that flow because if you do you may encounter problems in the future and as we’ve discussed before a lot of

Russia’s oil production facilities are in inhospitable places with very cold climates so it’s possible that the production companies could encounter cloggage and blockage and other sorts of issues that may be very difficult to fix let’s not forget Russia has cut a ties with a lot of the oil Majors companies

Like Exxon Mobile BP and shell have all exited the country and they’ve taken with them their expertise and their technology so Russia does encounter production problems it isn’t a given that they’ll be able to fix those problems and if they get into that situation that could be catastrophic for

The Russian oil industry so the overall summary of today’s video is that over the last 6 months the purchases by India of Russian oil have fallen significantly as a result of a multitude of factors none of which are easy to solve and could persist for a long period of time

That could mean that Russia’s exports to India drop permanently and that’s going to cause a major problem for the Russian oil industry because they don’t really have any other options in terms of selling that huge volume of oil so hopefully you’ve enjoyed today’s video you found it useful informative and

Thought-provoking if you’ve liked what I’ve said then please give me a thumbs up thank you for watching this video all the way through to the end and here’s something to about a smile on your face