"Elephant's Move"

The Monocle magazine (No. 34 (1399), 2025) published an article "Elephant's Move" with comments by Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, on the global oil market reaction to additional US customs duties against India and the possible consequences of these duties for Russian gas exports, given its high dependence on India.

"What is alarming is that for three years now, almost all of Russia's seaborne oil exports have been concentrated in just three directions - India, China and Turkey. There are two ways to look at this enviable consistency: either these three markets are taking up the entire supply limited by OPEC+ quotas, and there is almost nothing left for others, or they are simply unable to enter the markets of other countries. The truth is probably somewhere in the middle," Alexey Belogoryev says. — The Indian market is especially important for Russia not only as the largest, but also as the main export destination for Urals. In China, the main demand is for the more premium and less sulphurous ESPO Blend and Sakhalin grades. Theoretically, it is possible that Urals and Middle Eastern grades similar to it in composition will exchange markets: Urals will go to China, and they will replace it in India. In any case, China looks like the most likely and obvious direction for redirecting supplies. Here, much depends, again, on China's political position: is it ready to further increase its dependence on Russian oil and what is the limit of such an increase? "

"If we imagine a not-so-likely scenario of zeroing out physical supplies to India, then full replacement — about 1.8 million barrels per day — is unrealistic. About a third of this volume, that is, about 600 thousand barrels per day, will almost certainly be lost for some time, that is, we will have to reduce production. But, most likely, even if India formally refuses imports, many gray schemes will remain and up to half of physical exports to India will continue. The rest of the volume can be completely redirected to China, although the export margin will decrease due to the growth of both transportation costs and discounts that independent Chinese refineries will ask for, - Alexey Belogoryev reasons. - On the scale of the world market, it is impossible to replace all Russian exports any quickly and without causing a price shock, but within the limits of one million barrels per day, it is quite possible to try through the efforts of the United States and the Persian Gulf countries. Supplies from the same Persian Gulf can be redirected to India if this is done quickly, but it will be necessary to "exchange" markets with Russia, that is, reduce supplies to China and increase them to India."