- Trump pressures India with tariffs over Russian oil purchases.
- EU considers faster phase-out of Russian fossil fuels.
- Indian buyers demand deeper discounts amid sanctions risk.
The widening gap in policies between the United States and the European Union regarding Russian oil exports to India is anticipated to lead to a modest decrease in crude oil shipments this October, according to analysts and trade sources who are in the know about loading plans, reports Reuters.
Trump’s Policy Shift on India’s Oil Imports
U.S. President Donald Trump has adopted a firmer stance, insisting that India completely halt its purchases of Russian oil. When New Delhi pushed back, he responded by raising tariffs on Indian exports to the U.S. to as high as 50%.
Trump is using these tariffs as a tool to pressure India, the largest importer of Russian seaborne oil, in hopes of nudging Moscow towards peace in Ukraine. However, this strategy runs counter to the price cap initiative, which aimed to keep Russian oil flowing to India, China, and Turkey while limiting Moscow’s revenue.
“Sanctions coordination between the U.S. and the other G7 nations does seem to have largely broken down under the Trump administration,” said consultancy Energy Aspects’ head of geopolitics Richard Bronze.
EU Pushes for Tighter Sanctions
Ursula von der Leyen, the head of the European Commission, has hinted at a more aggressive approach, indicating that the EU is looking into speeding up the phase-out of Russian fossil fuels as part of new sanctions. An envoy and a team focused on sanctions are currently in Washington to explore potential coordination efforts. On the other hand, Indian buyers are pushing for bigger discounts due to the increasing risks in trade. Four traders shared with Reuters that discounts need to expand to about $10 per barrel against Brent prices to stay within the price cap, a significant jump from the $2–3 per barrel seen in September.
However, some Russian sellers are resisting this idea, claiming the discounts are too steep. They mentioned that some spot cargoes for October might be redirected to China, which could limit India’s supply, according to two trading sources. Looking ahead, Russian crude shipments to India in October are expected to be around 1.4 million barrels per day, a drop from 1.6 million bpd in September and 1.5 million bpd in August, based on information from those familiar with loading schedules.
October Volumes Expected to Decline
The final volumes will hinge on the ongoing negotiations between buyers and sellers. Even with the anticipated $10 per barrel discounts, most of the crude for October is likely to be sold above the new EU and UK price cap of $47.60 a barrel.
The EU has reduced the cap from $60 per barrel starting in October, while Brent was trading at $67 per barrel on Wednesday. Notably, the U.S. did not back the EU’s decision. The European Commission has stated its intention to align G7 members with the lower cap in the future, emphasising its importance as Western shippers continue to transport Russian oil.
“A growing split on oil sanctions policy will further increase confusion for market participants and potentially weaken levels of compliance,” said Tom Boughton from risk consultancy S-RM.
Russia Relies on Shadow Fleet
Russia has been increasingly relying on its so-called shadow fleet, tankers linked to Russia that are backed by Russian ship insurance. These ships can operate outside the price cap scheme because they don’t depend on Western service providers. Since 2022, Russian companies and traders have found ways to sell most of their oil above the cap, either by using their own vessels or by tweaking sales documents, as reported by traders, Western intelligence sources, and market analysts.
Poor sanction enforcement has allowed traders to push boundaries with little fear of penalties. As Energy Aspects’ Richard Bronze explained: “Poor sanction enforcement has encouraged traders to push boundaries or ignore sanctions altogether as they do not fear penalties.”
Price Cap Impact Remains Limited
Analysts note that while the price cap poses some obstacles, it is not a decisive threat to Russian oil trade.
The measure is “likely to remain a hindrance to Russian traders of oil, but not a major threat,” said Benjamin Godwin, partner at risk consultancy PRISM Strategic Intelligence. “Both the U.S. and EU could make serious moves to choke Russia’s oil and gas industry, but they would be extremely disruptive to global economic activity,” Godwin added.
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Source: Reuters
