China, India Seek New Oil Supplies as U.S. Sanctions Tighten on Russian Exports
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China, India Seek New Oil Supplies as U.S. Sanctions Tighten on Russian Exports
January 13 (Reuters) – SINGAPORE/NEW DELHI/MOSCOW – Chinese and Indian refiners are scrambling to secure alternative fuel sources in response to stringent new U.S. sanctions targeting Russian oil producers and tankers. These sanctions, the broadest imposed so far by U.S. President Joe Biden’s administration, aim to curtail revenues from Russia, the world’s second-largest oil exporter, as part of efforts to pressure Moscow amidst the Ukraine conflict.
The measures, announced on Friday, also coincide with the transition to Donald Trump’s incoming administration, which has yet to comment on its stance regarding the sanctions or peace efforts in Ukraine.
Broad Scope of New Sanctions
The U.S. Treasury’s latest sanctions package includes Russian oil producers Gazprom Neft and Surgutneftegaz, as well as 183 vessels identified as part of a shadow fleet. These tankers have been instrumental in circumventing prior sanctions, facilitating the flow of Russian oil to global markets, particularly in Asia.
According to Morgan Stanley, citing data from Vortexa, the targeted tankers transported approximately 1.5 million barrels of crude oil daily in 2024, representing 1.4% of global oil demand. Many of these shipments have supplied India and China, as Western sanctions and a price cap introduced by the G7 in 2022 redirected Russian oil trade from Europe to Asia.
Impact on Oil Markets
The sanctions have triggered a sharp rise in oil prices. Brent crude, the global benchmark, surged above $81 per barrel on Monday, its highest level since August. Additionally, the price premium for immediate delivery of crude over contracts for six-month delivery reached its highest point since April, reflecting market expectations of tight supplies.
The Kremlin criticized the sanctions, warning of potential global market destabilization. Kremlin spokesperson Dmitry Peskov stated, “It is clear that the United States will continue to try to undermine the positions of our companies in non-competitive ways, but we expect that we will be able to counteract this.”
Insurance Concerns and Environmental Risks
The U.S. sanctions also target Russia’s major ship insurers, including Ingosstrakh and Alphastrakhovanie. This raises questions about the vessels’ coverage in the event of environmental disasters, leaving uncertainties regarding clean-up costs and claims mechanisms.
Looking Ahead
As China and India explore alternative oil suppliers, the global energy trade faces significant shifts. With rising prices and strained logistics, the new sanctions underscore the geopolitical complexities surrounding oil markets, highlighting the ongoing ripple effects of the Ukraine conflict on global energy security.
