India’s Russian Oil Arbitrage Could Be About to End – David Blackmon
Clark Savage
Source: Squawk Box
ENB Pub Note: This is an outstanding article from David Blackmon’s substack, and we recommend you support and subscribe to his channel. We had covered this last week on the Energy News Beat Daily stand-up, and stated that it would cause problems for the India/US relationship. But as David points out, there are reasons that President Trump is not penalizing China, as they were already a huge Russian customer prior to the Ukraine War, and India is making huge profits off the discounted Russian crude only to sell it back to the EU in refined products to avoid sanctions—the ultimate sanction avoidance scheme.
Somewhat inexplicably, the Indian government led by PM Narendra Modi has chosen to thumb its nose at the Trump administration, seemingly sliding itself willingly into the China/BRICS orbit. This apparent strategic decision seems unwise given the fact that a) India needs access to the American consumer market, and b) President Trump has clearly shown he has no compunction about leveraging tariffs and sanctions to achieve global strategic objectives.
One of Trump’s overriding goals of the moment is to end Russia’s war on Ukraine, as well as the NATO proxy war with Russia that sprung up during the Biden presidency. India’s strategic decision to defy U.S./NATO/EU sanctions by becoming Russia’s main customer for discounted crude carried by the unregulated dark fleet of tankers since mid-2022 now stands as a major impediment to reaching that objective.
India has since built a major domestic industry based on taking the discounted Russian crude, refining it into its constituent products (gasoline, diesel, and other fuels and lubricants) and then exporting those products to willing buyers around the world. Those buyers include the U.S. and the same European countries who’ve imposed the sanctions in the first place.
It’s a hell of a racket. It’s also a racket that President Trump and his appointees are now focused on ending.
This new reality was made crystal clear by Treasury Sec. Scott Bessent during an interview on CNBC’s Squawk Box show Tuesday. In the interview, Bessent accused the Modi government of “profiteering” to the detriment of global security, describing the practice as “arbitrage” and aggressively condemning it.
“They are just profiteering. They are reselling,” Bessent told CNBC’s “Squawk Box” in an interview. “This is what I would call the Indian arbitrage — buying cheap Russian oil, reselling it as product. They’ve made $16 billion in excess profits — some of the richest families in India.”
Bessent also made clear that the Trump administration sees what India is doing differently than China’s own imports of Russian dark fleet crude since China was a major buyer before February, 2022, when Putin invaded Ukraine. By contrast, India’s imports began just weeks after the imposition of initial sanctions following that invasion. It’s a clear cause-and-effect relationship.
India buys Russian oil at a discount due to sanctions, refines it into gasoline and diesel, and then sells the product back to regions that have sanctioned Moscow such as Europe, said Matt Smith, an oil market analyst at Kpler.
India’s imports of Russian oil have surged since the Kremlin launched its full-scale invasion of Ukraine in February 2022. Before the attack, India imported a minuscule amount of Russian crude.
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In a bit of irony, Rapidan Energy CEO Bob McNally points out that India began its imports of Russian crude in response to a direct request from the Biden White House, which was at the time trying to influence the 2022 mid-term elections and saw this as a way to help keep gasoline prices lower in the U.S., despite its detrimental impact on the war effort in Ukraine.
Excerpt:
The Biden administration had asked India to accept Russian crude as other countries imposed bans in order to prevent a major oil price spike after the invasion of Ukraine that would result in high gasoline prices in the U.S., McNally told CNBC.
“India played a key role in the price cap sanction mechanism designed by the U.S. and its European allies to ensure Russian oil still flowed while trying to crimp the revenue Moscow earned,” McNally said.
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It’s such a classic example of the kind of hyper-partisan tactics used at any cost by the utterly corrupt Biden people.
But that was then, and this is now: Regardless of the motivations and hypocrisies that led to the beginnings of India’s arbitrage program, the Trump administration wants it to end now to help stop the carnage. Bessent makes clear the patience in the Trump White House is growing thin, and major tariffs and other economic sanctions will be headed India’s way if the Modi government chooses to remain an impediment to peace.
