Russian oil imports and global shipping at risk due to Red Sea tensions
The ongoing conflict between Yemen’s Iran-backed Houthis and shipping vessels in the Red Sea is causing major disruptions to global shipping routes. This has led to concerns for India, a significant importer of Russian crude oil and a major player in the export of petroleum products to Europe, both of which rely on the Suez Canal for transportation.
As a result of the attacks on vessels in the Red Sea, major shipping companies have opted to take the longer and costlier route around Africa’s Cape of Good Hope, bypassing the Suez Canal. According to a recent Reuters report, at least four tankers transporting diesel and jet fuel from West Asia and India to Europe have taken the longer route to avoid the Red Sea, carrying a combined 2.4 million barrels of fuel.
India’s growing role in the petroleum products export market has been highlighted, with data analytics firm Kpler reporting that India became Europe’s largest supplier of refined fuels in May last year. The country’s refined fuel exports to the Netherlands alone amounted to about $19,300 million in FY23 and FY24. These shipments reach Europe via the Suez Canal.
The impact of the Red Sea attacks on India’s petroleum product exports is evident in the data, with India emerging as the third biggest player in terms of petroleum product volumes sent north in the first half of 2023. The Netherlands, as the largest importer, mainly received these products from India during that period.
However, the situation is even more worrisome for India given the record amount of crude oil it imports from Russia. In FY24, India imported over $26,900 million worth of crude oil from Russia, making it the country’s largest source of oil. Most of this crude oil is transported through the Suez Canal southbound to India.
The charts depicting the southbound crude oil and petroleum product volumes from origin countries transiting the Suez Canal illustrate the dramatic increase in southbound supply of crude oil from Russia through the Suez Canal in FY23 and FY24. The majority of the southbound crude from Russia went to India, with China as the next largest importer during that period.
Refiners in India are now looking to increase supply from West Asia to mitigate the risks and potential rise in costs associated with transporting oil through the Suez Canal. With retail fuel costs already at a historical high in India and general elections approaching, the situation remains uncertain.
The escalating tensions in the Red Sea have the potential to significantly impact India’s crude oil imports from Russia and other countries using this shipping route. The implications for Russian oil imports and global shipping are significant and could have far-reaching consequences.