India and China Acting as Russian Crude Oil’s Refiners

Indian and Chinese exports of clean petroleum products into Europe quickly rising, in an indication that a part of their Russian crude oil imports are being reexported in the EU. In its latest weekly report, shipbroker Intermodal said that “over the past few months, we have seen a new trading pattern emerge in the oil trade, both crude and products. Since the introduction of price caps on crude (5-Dec-2022) and products (5-Feb-2023) from Russia, India and China have become the largest importers of Russian oil, as Europe and the G7 want to stay away. Regarding the ban on clean petroleum products, Refinitv data shows that Russian exports in Q1 2023 are 3% higher than the same period last year, while total exports in Q1 2023 account for 29% of total exports in 2022, 2021 and 2020, calling into question the efficiency of the ban”.

According to Intermodal’s analyst, Mr. Fotis Kanatas, “as far as Europe is concerned, imports of clean petroleum products from Russia have fallen by 47% compared to the same period last year, showing that the Continent is moving away from Russian products. The new trade patterns in crude oil also have an impact on product trade, as Russian oil eventually finds its way to Europe one way or another. The emerging importers of Russian oil (China and India) act as refiners and then export the products to Europe”.

“To better understand the role of China and India in the trade shift, it is important to look at the crude oil imports and product exports of these two Asian countries to Europe. For China, Russian crude oil imports in Q1 2023 were 13,467.12 kt, 54% higher than in the same period last year (8,740.45 kt), while product exports to Europe were 390.49 kt, 24% higher than in the same period last year and 17% higher than in the whole of 2021”, Intermodal’s analyst said.

He added that “looking at India, the figures are more impressive in terms of volume. In Q1 2021, Russia shipped 17,645.38kt of crude oil to India, 1,005% more than Q1 2022’s 1,597.49kt, as the Asian emerging market takes advantage of lower prices. India in turn refines the oil and transports it to Europe. The figures show increases here too. Q1 cargoes from India to European ports are up 18% on the same period last year, while cargoes since the beginning of 2023 account for 37% of 2022 cargoes. It clearly shows that these two countries, and India in particular, are making up for Russian products, which increases tonne miles and in turn supports freight rates”.

“Overall, the ban on Russian crude and products from the G7 and the European Union is changing established trade routes. Countries that have not sanctioned Russia, such as India and China, are benefiting from the lower prices, both by purchasing crude oil for domestic use and by exporting refined products to third countries. It is worth monitoring India for the remainder of 2023 to see if its crude imports continue to grow at least at similar levels. With price caps in place, if India continues to refine Russian oil for Europe, the route between the two destinations will continue to increase in value and offer higher freight rates for product tankers”, Intermodal’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide