China and India sniff a bargain
ON FEBRUARY 22ND, two days before Russia invaded Ukraine, a German-flagged vessel left the Russian port of Primorsk loaded with 33,000 tonnes of diesel. It failed to deliver them. When it reached Tranmere, a British oil terminal, on March 3rd, the dockers refused to unload the freight when they learnt where it had come from. Similar boycotts have sprung up elsewhere.
Iran manages to sell oil through two channels. The first is through authorised but restricted sales. As it imposed its sanctions America granted a limited exemption to eight importing countries. There is a big catch, however: the sales have to be paid in the buyers’ currency and either kept in escrow accounts at local banks or spent on a list of goods produced locally. For Iran that is deeply frustrating.
Instead seaborne exports have cratered because Western buyers, such as big energy firms, fear a public backlash. They also face financial and logistical headaches as cautious banks cut credit, ship owners struggle to obtain insurance and freight costs soar. And each time sanctions are tweaked, says Antonia Tzinova of Holland & Knight, a law firm, compliance staff must study hundreds of pages of ambiguous legalese, making many Russian deals hardly worth the hassle.
Only China, then, can save Russia. It imports a total of about 10.5m bpd . Mr Imsirovic thinks China could opportunistically increase its purchases to 12m bpd. That could allow it to buy 60m from Russia in relatively short order. It helps that China has lots of empty storage.
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