Russia’s Top Trade Ally Delivers Surprise Blow to Putin’s Fleet

Russia’s Top Trade Ally Delivers Surprise Blow to Putin’s Fleet

Reliance Industries, the Indian operator of the world’s largest refining complex, will not buy oil loaded onto tankers of Russia’s biggest shipping company, a report says, in the latest blow to Moscow’s efforts to sell its vital export.

Following Vladimir Putin‘s full-scale invasion of Ukraine, U.S-led sanctions have sought to isolate the Russian economy and restrict funds for its war effort. In February, the U.S. sanctioned Sovcomflot and 14 crude-oil tankers involved in transportation of the product.

Citing two unnamed sources, Reuters reported that Reliance, a major purchaser of Russian Urals oil, has requested that supplies not be shipped by tankers operated by Sovcomflot, for fear of breaching sanctions.

Russian oil tank
The grounds of a fuel-tank farm of Russia’s oil-pipeline giant Transneft on December 13, 2023. Reuters has reported that India’s Reliance Industries is rejecting Russian oil transported by the sanctioned ship operator Sovcomflot.

NATALIA KOLESNIKOVA/Getty Images

Reliance runs Jamnagar Refinery, located in the Gujarat state, which has a capacity of 1.24 million barrels per day, the world’s largest.

Other Indian refiners also plan to reject Sovcomflot vessels out of an “extra cautious” approach amid tighter scrutiny of Russian oil deals by banks and U.S. authorities, Reuters reported.

An Indian government source told the news agency that New Delhi prefers that refiners do not take oil from sanctioned vessels, “because of our political and commercial interests and the U.S. sanctions.”

The Indian government will decide on whether to allow sanctioned vessels or Sovcomflot ships to enter the country’s ports, the source added. Newsweek has contacted Reliance and Sovcomflot via email for comment.

India was a major beneficiary of the cheap Russia energy products Moscow offered after dividing the world into “friendly” and “unfriendly” countries in reaction to the sanctions.

However, their closer trading ties have been beset by problems. India paid for the oil with its own currency, the rupee, which is not freely convertible and subject to capital-flow restrictions, meaning oil proceeds have been stranded in Indian banks.

Payment problems have also delayed shipments of Sokol to the Indian Oil Corp, prompting India’s largest refiner to turn to Saudi Arabia for supplies.

Russia has faced other obstacles to finding new markets for its biggest export as it seeks to offset the ones lost because of the sanctions.

One such obstacle is a price cap that bans the sale of Russian seaborne oil exports sold above $60 a barrel, although Russia has turned to a shadow fleet in which the ships’ ownership is reorganized to obscure their connections to Moscow.

Payment disagreements have also kept buyers at bay, and in January, Reuters reported that tankers carrying 10 million barrels of Russian oil were stranded off the coast of South Korea.

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