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Russia proposes construction of joint oil fleet with India

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Russia and India continue to deepen ties despite Western pressure. Writes Ahmed Adel

Moscow has proposed to cooperate with New Delhi in building or leasing large oil tankers to circumvent Western sanctions and ensure crude oil transportation capacity. Specifically, this is in order to ship more crude oil to the largest buyers of Russian oil and not to lose profits.

The price cap on Russian oil imposed by the G7, the European Union and Australia has only had a limited effect on non-participatory countries. Since the imposition of the price cap on December 5, Chinese traders are still working as usual and private refiners have bought Russian ESPO oil.

According to the International Energy Agency, India’s import of Russian oil has increased from 30,000 barrels per day in February, to 1.08 million barrels per day, surpassing even China which imports 830,000 barrels per day.

In total, fuel traffic to Asia has tripled to 2.5 million barrels. The surge, according to S&P Global Commodities, has seen China and India now account for 68% of Russian crude oil exports shipped by sea, a reflection of the difficulties Russia faces in the West, such as receiving insurance and transportation services.

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It is recalled that earlier in December, Indian Foreign Minister Subrahmanyam Jaishankar stressed: “We do not ask our companies to buy Russian oil. We ask our companies to buy oil (based on) what is the best option that they can get.”

None-the-less, there are now complications in transporting Russian oil, resulting in increased freight rates. In addition, as mentioned, Western companies refuse to provide insurance for Russian oil tankers.

“It is necessary to change the routes of about half of the two million barrels per day. A shortage of ships is inevitable,” credit rating agency S&P Global Ratings pointed out.

It is for this reason that India and Russia are seeking to cooperate in shipbuilding – Russia needs oil customers and India is energy hungry, and just as importantly, both countries have an established relationship built on decades of fulfilling mutual interests. As Russian crude oil is mainly exported on foreign tankers, which can no longer be insured by Western companies, building a Russian-Indian shipping fleet is of mutual benefit.

The knock-on effect is clear: New Delhi will continue to buy as much Russian oil as it wants, even at a price set above the G7’s price cap as it can always refine the oil itself and resell it to Europe for profit. Also, complete independence from Western insurance, financial and transportation services is something that would be of mutual Russian and Indian interest as they both consolidate their respective spheres of influence in the Age of Multipolarity.

It is also for this reason that both countries are aiming for de-dollarization, with Russia expected to be one the first countries to use the Indian rupee trade settlement mechanism. Russia is not the only country interested in India’s rupee trade settlement mechanism, with Sri Lanka, Tajikistan, Cuba, Luxembourg, and Sudan also expressing interest.

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It is recalled that during Jaishankar’s visit to Moscow last month, he said that India will boost economic ties with Russia.

“For us, Russia has been a steady and time-tested partner and, as I said, any objective evaluation of our relationship over many decades would confirm that it has served both our countries very, very well,” he said.

India’s commitment to building relations with Russia is reflected in the fact that it has refused to impose sanctions despite Western pressure and has abstained from United Nations resolutions condemning Moscow over its military operation in Ukraine.

At the same time, as tensions between India and China mount, New Delhi cannot afford to risk upheaval in its military which is heavily dependent on Russian-made tanks, fighter jets and missiles.

Relations between New Delhi and Beijing have been less than ideal since a clash in June 2020 left several Indian and Chinese soldiers dead. With these tensions now renewed, India is especially not looking to sever its relations with Russia despite Western pressure, but in fact deepen them, including in the military industrial sector.

India has also increased its purchases of oil, coal and fertilisers from Moscow as part of their deepening of ties, and are boosting cooperation in the military and financial sectors. Although the West is insistently pressuring India to step back in its relations with Russia, the idea to create an Indo-Russian fleet to circumvent Western sanctions point to the very fact that nothing will undo this decades-old relationship.

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