Dozens of small traders and middlemen have recently exited the Russian crude oil trade to India, as rising interest rates and increasing costs to fund transactions have made the business less profitable, Reuters reported on Thursday, citing trade sources and shipping data.
India, which now relies heavily on Russian crude due to Western sanctions, has become one of Russia’s largest oil markets. Since 2022, after Russia’s invasion of Ukraine and the subsequent sanctions, Russian oil has become India’s top supply source.
In 2022 and 2023, many traders were eager to bring Russian oil to India, attracted by high profits despite the risks. Numerous smaller, newly-formed trading companies, often based outside Europe and with limited transparency, became key players in this market after Western companies withdrew.
However, Russia’s recent decision to raise its benchmark interest rate to 21%, the highest in two decades, has significantly increased the cost of financing trades. Since Western banks are no longer funding Russian oil transactions, traders who rely on Russian banks for financing have been hit hard by the rising costs.
As a result, many middlemen have pulled out of the market, leaving the business in the hands of a few major trading firms. Currently, most of Russia’s crude oil exports to India are handled by Litasco Middle East, the Dubai-based arm of Russia’s Lukoil, along with Dubai-based Hinera Trading and Black Pearl Energy Trading, according to shipping and customs data seen by Reuters.
Demand for Russian crude in India remains high, as it is cheaper than alternatives due to the sanctions. However, the discounts on Russian oil have narrowed recently. This has led private Indian refiners, such as Reliance Industries and Nayara Energy (controlled by Rosneft), to reduce their imports of Russian oil by 18% in November compared to October, as reported by The New Indian Express, citing data from Vortexa.
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