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Getting around the sanctions

Stealth oil imports is only a band aid amidst the current conditions

With the Russia-Ukraine conflict, (Russia) has only China and India to fall back on. Nevertheless, the fear of possible sanctions will remain as long the conflict persists. On the other hand, this created a dangerous market which a substantial number of traders are willing to take their chances in.

Importing on stealth mode
A major report mentioned the market is waiting to see if Russian firms such as Surgutneftegas PJSC will proceed with monthly sell tenders for Eastern Siberia–Pacific Ocean (ESPO) crude. The ESPO crude is transported through a designated Russian-built pipeline system for outgoing crude to Asia-Pacific markets.

The offers are unlikely to attract any bids according to oil traders. Instead, shipments at steep discounts will probably be marketed privately on a one-on-one basis. That makes Russia’s ample inventory too enticing for traders to be cautious, given demand eclipses the costs.

While Russia is plucked off SWIFT, India is putting its stakes on the possible Rupee-rouble trade implementation to sustain imports. It is a payment mechanism which allows Indian exporters to be paid in Indian rupees for their Russian exports, instead of by standard international currencies such as dollars or euros. Under this arrangement, a Russian bank will need to open an account in an Indian bank and vice-versa. Such is under the condition the country (India) is not imposed sanctions, the same applies to China. Chinese private refiners are also discussing ways to keep procuring with traders and intermediaries, while managing the challenge of securing vessels at affordable rates.

The pattern will create the alternative mode for oil imports, if not crystallise the practice. More tricky disruptions on oil trade will be another challenge to overcome after the dust settles. In spite of being a cost-effective option, the industry will witness a colossal imbalance of reported pricing and transactions. That might result in another error which will take years to correct.

Marine Online News Team
Please email us at marketing@marineonline.com to contact the author for this article.

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