"India's abandon our oil is fraught with deterioration of relations"

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, gave a detailed interview to the Novye Izvestia online portal about the possible impact of new US and EU sanctions initiatives on Russian oil exports.

— Amid new Western sanctions, the Minister of Oil and Natural Gas of India did not rule out the possibility for his country to return to the old fuel supply schemes. How serious is this?

— Yes, until 2022, India bought most of its oil from the Persian Gulf countries, fortunately, it is located very close to this region, so the main suppliers of oil to India were Iraq, Saudi Arabia, the United Arab Emirates, Kuwait and so on. The switch to Russian oil was due to the fact that we offered them good price discounts, which turned out to be beneficial for the Indians.

— And what is now?

— If we talk about whether India will be able to completely abandon Russian oil, theoretically, it will be able to. But we must understand that the share of Russian oil in the Indian market is large, about 40%. That's a lot.

We must understand that India is likely to find a solution in which it will buy Russian oil. I am almost sure that some volumes of oil purchases by India will remain. It is possible that some companies will abandon purchases, but some volumes will remain.

But, of course, India will ask Russia for a fee for this, which will be in the form of additional price discounts. We will still need to negotiate with our Indian partners to provide discounts, which India has always been very interested in.

— How are the Russian authorities going to solve the problem of reducing exports?

— Russian Deputy Foreign Minister Andrei Rudenko said that it is necessary to resume the trilateral format of economic dialogue between Russia, China and India.

If we tie together the different ends, we will see that this conversation arose just a few days after Donald Trump's speech. India and China are the largest buyers of Russian oil, and it is obvious that the resumption of such a trilateral dialogue on Russia's initiative is most likely related to resolving issues of how oil cooperation between these three countries will potentially be built if Trump's threats in September become reality.

— Will the price of Urals under Chinese and Indian contracts turn out to be the same notorious 47 dollars?

— It could be. The combination of these factors may lead to the fact that Russia will be forced to offer its partners oil at significant discounts, which will be to some extent comparable with the possible new price ceiling level offered by European countries.

It seems to me that if we start from the assumption that the United States will put into effect its sanctions threats against Russia from September, then part of Russian oil exports will still suffer. We understand that China and India account for 85-87% of Russian oil exports today, while other countries, including Turkey, account for 13-15%.

Supplies to Turkey and one-time supplies to some other countries, such as Pakistan and Bangladesh, where we periodically supply, they will refuse to purchase Russian oil, fearing secondary US sanctions. China is least likely to follow this example, and the issue with India is a matter of economic agreements.

— If we consider the worst-case scenario: China continues to buy Russian oil, India refuses, Turkey refuses easily. What are the export options? What will happen to the budget?

— This, of course, will be unpleasant for the Russian economy and the Russian budget, because in such a situation, Russian oil exports may decrease very significantly. In theory, a twofold reduction in Russian oil exports is possible if India and Turkey completely abandon Russian oil. I personally estimate a reduction in Russian oil exports of 10-15% from last year's level. No more.

From the point of view of a "negative scenario", I consider the probability of such a development to be low, because countries that decide to take such actions, for example, India, will have serious economic problems.