The Dieseleuro: Europe Is Guzzling Russian Oil In The Form Of Indian Diesel Imports

As western politicians ever so theatrically pretend to sanction Russian oil imports (just so they can signal to their voters just how virtuous they are), especially now that the war in Ukraine is almost over with the US and Germany “pressing Kyiv to end the nearly two-year old conflict”, and have gone so far as to ‘demand’ Greek tankers no longer transport Russian oil (something which most of the Greek dark fleet is and will continue to do), the true comedy is just how hard everyone is working behind the scenes to keep the status quo in place. For a glaring example of western hypocrisy look no further than the Russia-India-Europe petrodollar or rather dieseleuro triangle, where one year after banning most oil shipments from Russia, Europe is now binging on Indian diesel…  that was made from Russian crude.

Europe’s imports of diesel from India, one of the biggest buyers of Russian crude, are on course to soar to 305,000 barrels a day, the most since at least January 2017, the latest data market-intelligence firm Kpler show.

While it’s not possible to say with certainty that the molecules originated in Russia as India also processes oil from elsewhere – although a blockchain lifecycle tracing would be most useful in this regard – Moscow’s soaring (and cheap) oil exports to India have given Indian refineries an ability to produce abundant diesel and boost both profits and exports.

According to Bloomberg, arrivals into Europe in November include a rare shipment from Mumbai-based Nayara Energy, which imported almost 60% of its crude from Russia this year, according to Kpler. Reliance Industries, Europe’s top supplier of Indian diesel, draws more than third of its crude from Russia, the figures show.

The surge in diesel imports from India illustrates a hilarious shift in oil trading in the wake of the Kremlin’s war in Ukraine, which shows that for all its rhetoric, all Europe has managed to do is shoot itself in the foot and pay more: a year ago, Russia was Europe’s top supplier of diesel, a fuel vital to the industrial and transport sectors (or not so vital now that Europe is in a stagflationary recession). Then, the EU banned most seaborne imports of Russian crude in December and oil products in February. In response, Europe and the UK have sought diesel supplies from other markets and India has been delighted to help fill the giant Russian supply gap as European imports from the US, Turkey and Saudi Arabia slumped in November, while arrivals of Saudi diesel are set to drop to about 94,000 barrels a day, the lowest since February 2020 (largely due to planned local refinery maintenance, boosting interest for Indian diesel).

And the punchline: to produce the distillates demanded by Europe, India has been importing record amounts of Russian oil which it then processes before reselling onward to, you guessed it, Europe.

Indeed, as Bloomberg notes, as the West shuns Russian oil, “Moscow has found increased appetite for its crude in Asia. Indian refiners have been able to purchase Russian crude at a discount and sell the processed oil in markets, like Europe, where diesel is in high demand.”

“The 1.6-1.8 million barrels a day of Russian crude that Indian refiners buy creates a competitive edge that others do not have,” according to Viktor Katona, lead crude analyst at Kpler.

The share of Indian diesel flows to Asia now accounts for about 19% of the country’s total exports of the fuel, compared with 33% last year, he said. Much of that volume has been diverted to Europe. In total, Europe’s imports of diesel and gasoil this month are set to rise to 935,000 barrels a day, a 5% increase from October, Kpler data show.

Still, with everyone now able to see between the lines in Europe’s hypocrisy, it is getting a more difficult to keep the charade going, and today India was considering whether to allow a now-sanctioned tanker carrying Russian oil to approach and dock at one of its ports—a sign that the U.S. clampdown on Russian crude trade could limit India’s ability to buy and import cheaper oil.  

The NS Century tanker is owned by Russia’s state-owned fleet owner Sovcomflot and is flying the flag of Liberia. The Aframax vessel has been floating for 10 days about 1,600 miles off the Indian port of Vadinar, where it was planned to deliver its cargo of Russia’s Sokol grade, Bloomberg reports, citing tanker-tracking data.

.NS Century has been floating off Sri Lanka since November 17, a day after the U.S. sanctioned several maritime companies and three vessels for transporting Russian oil above the G7-set price cap.

The U.S. said on November 16 that the vessels Kazan, Ligovsky Prospect, and NS Century engaged in the export of Russian crude oil priced above $60 per barrel after the crude oil price cap took effect. The Kazan, Ligovsky Prospect, and NS Century used U.S.-person services while transporting the Russian-origin crude oil.   

The Directorate General of Shipping in India told Bloomberg last week that it was still waiting for government guidance on whether the NS Century would be allowed to unload its cargo at the Indian port.

As we reported over the weekend, the West is considering toughening up the sanction enforcement on evaders of the price cap on Russian oil, almost none of which now trades below the ceiling of $60 per barrel. Last month, the United States took a tougher stance on the sanctions against Russia and sanctioned two vessels for violating the price cap. Meanwhile, three major Greek shipping firms had halted the transport of Russian crude due to the heightened risk of facing U.S. sanctions.

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