Challenges facing Russia’s Sokol Crude trade to India persists

Nearly 15 million barrels of Russia’s Sokol crude intended for delivery to India stand stranded at the coasts of Malaysia and South Korea. According to Bloomberg’s vessel tracking data, twelve tankers carrying Russian crude have been stationary for over a month now.

The disruption began last year when ships carrying crude to ports around the Indian coast came to a halt and then turned back towards the South China Sea as December drew to a close. Ever since then, the stranded shipments have been piling up at a rate of about two new cargoes a week.

While situations seemed to ease earlier this month, with three cargoes heading back to the south Asian nation and a fourth signaling its destination as the Indian east coast port of Visakhapatnam, still most remain stuck, impacting the pace of exports.

Shuttle tankers designed for Sokol crude transport are accumulating off the South Korean port of Yeosu, potentially hindering future shipments to India.

Various sources have provided different reasons for the disruptions.

Oil Minister Hardeep Singh Puri in January cited the unattractive discounts on cargo and payment-related challenges as a reason for refiners reducing oil imports from Russia.

The same view has been echoed by refiners, showing no plans to purchase Sokol as there is a premium of $2–$3 per barrel compared with Urals, which means it doesn’t make any commercial sense to buy.

However, Puri subsequently also said that the enforcement of a price cap imposed on Russian oil exports by the Group of Seven Nations, along with challenges with shipping, had hampered some deliveries of Sokol to India.

With Sokol trading at over $70 per barrel, the US Treasury is closely monitoring shipments of the grade to ensure compliance with the cap on sales of Russian crude.

While some of the Indian refiners have overcome these issues for recent deliveries, there’s uncertainty about normalizing Sokol imports to India, which is a significant buyer of this grade, constituting about 10% of its total Russian imports.

Unless Sokol imports are normalized, India’s shipments from Russia are unlikely to hit the 2.1 million barrels a day reached last spring. There is still no clarity on whether transferring cargo onto unsanctioned tankers will unlock the Sokol trade to India. But one thing is clear: Indian refiners are not rushing back yet.

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