China and India's suspension of oil purchases due to new US sanctions has caused shipping costs to skyrocket, Reuters reported.
In early January, the US Treasury Department sanctioned 183 vessels belonging to Russia’s “shadow fleet” – vessels that circumvent Western oil price caps to smuggle Russian oil to the world – in a comprehensive sanctions package aimed at undermining Moscow’s energy revenues.
As a result, the cost of transporting ESPO crude oil from Russia to China has increased to 6.5-7.5 million USD/ship, while India has to pay 9-10 million USD/ship.
ESPO Blend crude oil prices for China in March have increased to a premium of $3 to $5 per barrel over Brent crude, currently trading at $77.30 per barrel.
Indian refiners have not yet received any offers to buy Russian oil for March, according to Bharat Petroleum's chief financial officer, Vetsa Ramakrishna Gupta.
Despite a transition period until February 27 for sanctioned vessels to complete unloading, some ports have already begun delaying loading Russian oil.
In 2023, Russian oil will account for 36% of India's total oil imports and nearly 20% of China's. But with new sanctions, the Russian oil market could face a major crisis.
The US sanctions package on January 10 also targeted dozens of traders, insurance companies as well as major Russian oil companies Gazprom Neft and Surgutneftegaz.
Despite the US sanctions, Russia has vowed to “minimize” the impact of these measures. However, with some 600 vessels in its “shadow fleet” under close surveillance, Russia could lose a strategic card in its energy war with the West.
