Key Takeaways:
- India and Russia have decided to move away from Brent oil benchmark
- In a recent deal, both countries will use the Dubai oil benchmark instead for spot and futures trade
- Last week, Russia's Rosneft signed a long-term agreement with Indian Oil Corp to increase oil export to India
YEREVAN (CoinChapter.com) — In another victory for Russia against the collective West, India has agreed to trade oil with Moscow using the Dubai benchmark.
The recently-negotiated deal between Rosneft and refining giant Indian Oil Corp will replace the Brent benchmark. The latter has long been a set European standard for oil trade.
The fact that the Russian Rosneft and the Indian refiner are state-controlled companies is bad news for Western powers. It indicates that the decision may be a state policy rather than an isolated, one-time deal.
Experts view the development as a continuation of the Kremlin’s policy of accelerating oil sales in Asia. With crippling sanctions by the United States and its allies for its invasion of Ukraine, Moscow offered discounts on its oil to partners like India and China.
The Brent benchmark has long dominated the crude oil market. More than three-quarters of the world’s traded oil is measured using it.
Like the Brent benchmark, the Dubai oil benchmark is also a pricing mechanism. Also known as Fateh in Dubai, it is predominantly used to price the exports of Persian Gulf oil to Asia. Moreover, traders use the benchmark to measure spot and forward contracts for Dubai crude oil.
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Rosneft CEO Igor Sechin’s India visit behind the decision
Last week, Igon Sechin, the Chief Executive Officer of Rosneft Oil Company, made a working trip to India.
According to the company’s official press release, Sechin met with several Indian Government officials during the visit. Moreover, he also held meetings with the heads of the country’s largest oil and gas companies.
As part of the working visit, Rosneft also signed a long-term agreement with the Indian Oil Company. Under the agreement, Rosneft will increase its oil supplies to India. India’s Minister of Petroleum and Natural Gas, Hardeep S. Puri, oversaw the signing of the agreement.
According to the latest statistics from the Ministry of Commerce and Industry of India, the trade volume between the two countries reached $38.4 billion in 2022.
“The goal set by the leaders of our countries to increase turnover to $30 billion by 2025 has been achieved in advance,”
Igon Sechin said during the signing.
On the same day, another top aide to Russian President Vladimir Putin, Nikolai Patrushev, also met Indian Prime Minister Narendra Modi in New Delhi. Patrushev is the Kremlin’s highest-ranking security official who has served as the secretary of the Security Council of Russia since 2008.
Since the Western sanctions on Russia, Asia has replaced Europe as the largest buyer of Russian oil.
Under the latest agreement, Indian Oil Corp will nearly double its oil imports from Rosneft. The special discounted oil of $8-$10 per barrel calculated using the Dubai benchmark could see the Indian refining giant procure as many as 11 million barrels per day from Russia.
