Russia cannot get a billion dollars for oil from India: the money is in Indian bank accounts – but not in dollars, but in Indian rupees. About it writes Bloomberg agency. With the loss of buyers in the West and the price ceiling imposed by the G7 and the European Union in May, Russia was supplying India with a record two million barrels of oil per day, up 15% from April, according to the agency. In terms of oil supplies to India, Russia has overtaken Iraq and Saudi Arabia.
Deals between Russia and India are concluded in US dollars, but India is ready to pay for this oil only in its own currency. As a result, due to a significant trade surplus between Russia and India, one billion dollars in “petroleum rupees” is simply a dead weight, writes Bloomberg. An acceptable solution for Russia would be to pay for oil in the currency of third countries, for example, in Chinese yuan or the Emirates dirham. But India does not agree to this, and Moscow has no leverage in New Delhi.
The price of a barrel of Russian Urals oil on the market in May was $53 per barrel, five dollars less than in April. At the same time, the Russian budget, which this year is running with a deficit that exceeds the forecast by half a billion rubles, is calculated from a price of $70 per barrel. Russia sold oil to India in May at $68, but this price also included the delivery of oil to the buyer.
Why Russia sells oil to India if it cannot get money for it, RusEnergy oil and gas analyst Mikhail Krutikhin said on the air of Real Time.
Mikhail Krutikhin on why Russia sells oil to India if it cannot get money for it
“Oil has to go somewhere. And in this case, we see the benefit of Russian oil companies, because when Russian companies sell oil in the port, they pay taxes to the Russian state according to the indicators of the so-called customs price of oil. And this price is very low. They don’t care where this oil goes: to India, to African countries, to China, or somewhere else. But because they are paying at a very low price—below $60 a barrel—they also pay less in taxes. They sell oil to trading companies, which very often belong to the oilmen themselves, but they are registered abroad, so this money is not returned to Russia.
That is, it is now profitable for Russian companies to simply push as much oil as possible out of Russian ports for export and get a huge tax discount, because taxes are paid from a very low price, and even further resell this oil in order to leave this profit abroad. That’s why Russia sells oil even to India, even anywhere.
– It turns out that taxes in the Russian treasury come from such transactions?
– Taxes, of course, are received, because the price is not zero, as indicated, the customs price. But if we look at the latest data for five months – January and May of this year – the latest released data from the Ministry of Finance shows that Russian oil and gas revenues have fallen by 50%. Somewhere in April it was 52%, and now it is 50%. Half of the income just evaporated. This part of the income is pocketed by intermediaries or the same oil companies that do not return this money to the budget, and through their front trading companies they accumulate it on foreign accounts in Hong Kong, Singapore, Abu Dhabi and so on.
– Accumulate, then what to do with them?
– It’s different. No one is going to give them to the Russian state budget. So the budget that finances the war is left without money. And this money goes to some, I think, including corrupt officials and figures of Russian oil and other companies that participate in this chain: from shipping oil to the port to delivering it to consumers.
– Everything you are talking about is the consequences of the sanctions that were imposed against Russia? These are the consequences of the price ceiling that was introduced “big seven”“?
– Let’s look further. These are all the consequences of the war, because the sanctions did not appear out of nowhere. They appeared because of the aggressive, dirty and vile war that Russia unleashed on the territory of Ukraine.
And sanctions – yes. There was an idea like this: “Let’s ban decent countries from buying Russian oil and oil products.” Then they came to their senses and said: “Why ban it?” The flow of oil must somehow match the supply and demand in the market. Let it all stay that way. But the price at which Russia sells its oil – the customs price – should not exceed $60 per barrel. This is how sanctions work. Their actions end at the port. And what kind of tankers they carry – shadow, non-shadow – who transfers oil from tanker to tanker – it does not matter. The tankers worked when taxes were paid on a very low price.
– Can we provide some numbers? Bloomberg writes that, for example, Russia supplied oil to India for $68, but this price included the freight price. At the same time, the actual market value of this oil, as far as I understand, is $53. How much of this money ends up in the Russian budget?
– Figures for the Russian budget have been published. The most important figures are 50%, which have decreased. And how much oil got into India or somewhere else is absolutely unimportant.
The thing is that Russia, even at the last meeting of OPEC +, could not present any real figures in terms of production and exports. The only thing she referred to was: “You know, there are some independent observers here – here they are, on average, deducing some numbers. Perhaps we will work with them later, present you with a real figure.” According to the decision of the Russian leadership, the volume of Russian oil production is a state secret. They do not issue them even where they are present as a member of the cartel, that is, in OPEC +. It’s kind of a funny situation. Russia actually does nothing there, but is present in the role of a wedding general. In fact, Russia, with its cheap oil, undermines the actions of this cartel, which is trying to stabilize the market.
– As far as I understand, OPEC + was meeting the other day. They again agreed there to reduce the volume of oil production in the world among these oil-producing countries. What will happen to prices because of this? Now Russian Urals costs $53. Can we expect it to be even cheaper?
– I don’t rule it out. Here in this case the question is who will buy this Russian oil. If there are hunters. In India, perhaps, in May there is even a slight decrease in appetite for Russian oil, because Indian companies have nothing to pay except in rupees. And then this entire trade may stall, because Russia has nothing to do with rupees.
Further, we see that some Indian companies are actually sanctioned when banks refuse to conduct a transaction with Russian oil when they see that the price of Russian oil is shown there more than 60 dollars. This is a breach of sanctions. And the violation of sanctions is to spoil the relations of Indian companies with American banks, with American entrepreneurs, with business, with European colleagues and partners. This is getting dangerous.
SEE ALSO: “EU puts an end to dependence on Russian gas.” Mikhail Krutikhin explains why it is difficult for Russia to find an alternative to the European market
2023-06-10 02:30:43
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