As we know, lot of Russian Oil Imports take place in India as well in certain other non-western countries like China & Japan. Wondered how Russians are beating the Sanctions by the West?
The main problems in sanctions by the G7 are Four-fold: 1. You cannot hire a Tanker Vessel from G7 Country or those countries aligned with them like Greece 2. You cannot pay in USD, Pounds or Euro. 3. You cannot insure or re-insure the Cargo, Vessel or Liability with the Insurers from G7. 4. You cannot get cheap export finance from Western Banks. How did both the countries circumvent these 4 pronged attack?
Well, Indian buyers have found interesting ways to ensure dead-cheap Crude Imports by-passing the Sanctions by the G7 & their associate countries, as Russian Oil is 30 % cheaper! First, there are lot of Oil Vessels outside the West & Japan -e.g China & Russia, though old. These shipping companies have hit a jackpot, but Indian Government has now banned ships more than 25 years old. Hence Chinese and Russians are modernizing their Oil Tankers!
For payments, Indian Companies are trading in Russian Rubles or Indian Rupees. Indian Banks have been providing import finance to these companies, if they needed.
For Cargo Insurance Indian Importers have been buying on DDP basis, thereby avoiding need for transit insurance. Accordingly, they also avoided necessity for P&I cover for cargo owners as Indian customer does not own the cargo.
It is also a long-time practice where sanctioned country crude carrying ships switch off their AIS (automatic identification system) and swap oil from sanctioned vessel to non-sanctioned vessel, so that USD payments and insurance by western companies become possible. Sanctions won’t affect the Second Vessel & transferred Cargo, as origin is obscured. These shadowy transfers are called “Dark STS” (STS is Ship-to-Ship transfer). There were 524 Dark STS in 2023 First Quarter alone ! Dark STS is punishable by the Flag state of the Vessel, but difficult to find out. This has also significantly increased exposure to maritime liabilities like Oil Pollution, as the vessels involved are very old.
A satellite image (CNN) taken on March 20, 2023 shows two tankers conducting a ship-to-ship transfer of Russian fuel oil near the Bay of Lakonikos (Off: Greece), according to Kpler. Transactions like these have surged in recent months, per data from S&P Global.
Indian Ports cannot entertain these Vessels carrying cargoes subject to sanction by the G7 Countries, unless they carry P&I Insurance. Protection & Indemnity insurance for a Ship is just like third party insurance for automobiles. There are 13 world famous P&I Clubs (IG Club) which are very reputed in settlement of their claims, controlling 90% of world’s third party liability insurances in Shipping industry. IG Club is again from the G7 & their affiliate countries. Hence the Vessels with Russian & Iranian crude vessels that arrive in India have been obtaining P&I covers from other smaller less-well-known Clubs like Kish P&I (Iran), China P&I, Qita P&I, Falcon P&I and so on. Their claim paying experiences are yet to be tested.
Image-Economic Times. Fortunately for India, there is no ban of exports of Oil Products by India to the West, using Russian Oil. India leads such “Laundromat” countries and the Oil Companies in India have indeed made a wind-fall profit thanks to Russian- Ukrainian War
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