January 2, 2024
New Delhi, India
India’s December Sokol Crude Imports Plummet Amid Payment Challenges
In a noteworthy development, India experienced a significant decline in crude oil imports from Russia in December, marking the lowest levels since January 2023. The slump is primarily attributed to payment issues surrounding the Sokol grade crude, as reported by data intelligence company Kpler.
Payment Issues and Sanctions Impacting Imports
Six tankers carrying Sokol grade oil were unable to deliver due to payment issues, exacerbated by tightening sanctions. Notably, Sakhalin-1 LLC, a key supplier, struggled to open a bank account in the United Arab Emirates (UAE) for receiving payments in dirhams, leading to delays and challenges in the trade.
Import Volume Fluctuations
Russia, despite being India’s primary crude supplier, witnessed fluctuations in oil import volumes. From a record high of 2.15 million barrels a day in May, imports experienced a sharp decline to 1.48 million barrels a day in December. The latter figure represents the lowest import volumes since January 2023, constituting 32.9% of India’s total oil imports for the month.
Shifts in Trade Dynamics and Potential Rerouting to China
Amid challenges, two of the idle tankers around India’s coast have indicated potential rerouting to China, signaling a shift in trade dynamics. Despite obstacles, there are indications that Sokol grade oil trade between Russia and India might persist, with additional ship-to-ship transfer operations and new cargoes showing India as their final destination.
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Yearly Import Trends
For the full year 2023, India’s oil imports from Russia more than doubled on a yearly basis, reaching 1.79 million barrels a day. In contrast, the second-largest supplier, Iraq, experienced an 11% contraction in oil imports to 908,000 barrels a day during the same period.
Dual Problems for Sokol Crude Cargoes
Sokol crude cargoes faced dual challenges, with at least one tanker, NS Century, sanctioned by the United States for dealing in Russian oil above the G7’s price cap. Additionally, payment issues further complicated matters, with Sakhalin-1 LLC struggling to secure a UAE account for accepting payments in dirhams.
Payment in UAE Dirhams
To navigate challenges in processing payments in dollars for Russian crude, Indian public sector refiners are now opting to pay in UAE dirhams for such cargoes. This strategic shift underscores the evolving dynamics of international trade amidst geopolitical and economic complexities.
In conclusion, the decline in India’s crude oil imports from Russia underscores the intricacies and challenges associated with global trade, especially in the context of geopolitical tensions and economic sanctions. The situation prompts a reevaluation of trade dynamics and sourcing strategies in the ever-evolving landscape of international commerce.
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