Despite Western sanctions, Russian oil exporters are charging more for their oil in the Indian market than at any time since the start of the Ukraine war. This is due to a growing number of shippers and intermediaries participating in the trade, weakening the impact of sanctions.
Initially, Russian exporters had to offer deep discounts to encourage shipping companies and traders to move their crude and brave the risk of sanctions. However, the situation has changed in recent months.
Russian exporters have struck deals this month to sell their flagship Urals oil for delivery to Indian refiners at discounts of $3 to $3.50 per barrel to the global Brent crude benchmark. This is the narrowest discount since early 2023, when the discount was as high as $20 per barrel.
The shrinking discount reflects Russia’s success in finding new buyers for its oil, with India becoming the biggest buyer of Russian seaborne crude ahead of China and Turkey. It also reflects an increase in the number of ships carrying Russian oil, with over 630 tankers, some of them older than 20 years, currently involved in shipping Russian oil and sanctioned Iranian crude.
The operators of these ships are largely based in China and the United Arab Emirates, accounting for about 14.5% of the overall global tanker fleet. Before the Ukraine war, this “shadow tanker fleet” totaled around 280-300 vessels.
The price cap initially created a shortage of ships for Russian oil sales to India and China, with freight rates reaching up to $20 million per tanker per one-way voyage. However, freight costs for shipping Russian oil to India have declined to about $5-5.5 million in June, getting close to pre-war levels.
As a result, Russian exporters have been able to charge higher prices. So far this year, the price of Urals oil at Baltic ports has averaged $69.4 per barrel, compared to $54.8 in the same period of 2022.
Despite this, Western powers say sanctions have deprived Russia of at least $100 billion in lost oil revenues, in addition to the confiscation of $280 billion in central bank assets. They are committed to making it more expensive for Russia to sell oil via the shadow fleet.