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In 2021, Indian refining giant Reliance Industries announced plans to move most of its oil trading staff from Mumbai to Dubai. In 2022, Switzerland-based Litasco (the trading arm of Russia’s Lukoil) will also move some of its operations to Dubai. Rosneft and Gazprom Neft are also considering opening offices in Dubai. It’s not just traders, either.Reuters recently Report Indian refiners have started paying for their Russian oil cargoes in UAE dirhams. These dirhams are paid under the deals made with traders in Dubai. An unprecedented wave of Western sanctions against Russia is now prompting a redesign of the international oil market. And it’s likely to be permanent.
Earlier this week, Reuters’ Alex Lawler detailed transfer Changes in oil flows after U.S. sanctions on Iran and EU and G7 sanctions on Russia diverted Iranian and Russian crude from Europe and the U.S. to Asia. In doing so, the sanctions push has driven oil prices lower for Asian buyers after decades of what analysts call an “Asian premium”.
“It’s safe to say that some major consumers in Asia, especially India and China, are the main winners of the sanctions,” Ole Hansen, head of commodities at Denmark’s Saxo Bank, told Reuters.
In fact, China and India have been big winners of Russian oil discounts, and they will continue to be winners even as the discounts start to shrink. As the EU prepares to impose an embargo on Russian crude oil imports and coordinate with the G7 to implement a price-cap regime to ensure the market is well supplied, there are fears that the price-cap regime will betray its purpose.
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The reason for concern is that the implementation of the price cap will take the form of denying Western suppliers shipping and insurance services for all Russian cargoes sold for more than $60 a barrel. But the United Arab Emirates is not in the West. It turns out that there is a well-developed insurance industry and shipping industry there.
Reuters Report In early March, more cargoes of Russian oil arrived in the UAE since the embargo began in December. The total volume of these cargoes is 1.5 million barrels, which is nothing to write home about, but it is not the usual flow route.
after that Report Industry sources were quoted as saying that as more Russian barrels are shipped to the UAE, the need for storage and transshipment capacity at Fujairah Port will expand.
“We have seen a huge influx of Russian barrels into Fujairah … especially Urals (crude oil) and naphtha,” a port official said at a recent industry event, cited by Reuters.
Perhaps more notably, Asian buyers of Russian crude are teaming up with Russian insurance and shipping service providers operating in the UAE to insure cargoes that Western counterparts refuse to cover.More importantly, this has been going on Because before the price ceiling is agreed.
Russian oil exports to China and India running A record high. Even at a smaller discount to Brent, Russian crude could save Indian refiners as much as $1 billion a year, Reuters noted.Then they can make good profits Sell Fuel produced from Russian crude oil is supplied to Russia’s former crude oil customers in Europe.
The Ukrainian war has changed the global oil trade route in such a way that buyers and service providers who used to benefit from nearly all oil shipments around the world are now cut off from it.
Western insurers can only cover Russian oil below the cap, and so far there is very little information on oil exports as a percentage of total exports. Major oil traders are shunning deals with Russian oil amid fears they could violate sanctions.
However, there are always alternatives and the United Arab Emirates is becoming a hub for these alternatives, with traders, insurers and shippers all able to ship crude where it is needed.
By Irina Slav for Oilprice.com
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