Russia offers to help India build large-capacity ships

Russia has offered to assist India in leasing and building large-capacity ships in a move that could see Indian exporters cut their expensive dependency on foreign shipping lines. The Russian offer follows India’s refusal to join the price cap on Russian oil imposed on 5 December by G7 countries and their allies.

“The Deputy Prime Minister (Alexander Novak) welcomed India’s decision not to support the price cap on Russian oil, which was imposed on December 5 by the G7 countries and their allies," the Russian foreign ministry said in a statement.

To be sure, the Federation of Indian Export Organizations has been lobbying the government to set up an Indian shipping line of global repute, saying Indian exporters have been largely dependent on foreign shipping lines. India repatriated over $80 billion in transport services in calendar year 2021, it said.

Mint has previously reported that the government is working on a production-linked incentive scheme for manufacturing shipping-grade containers. Disinvestment-bound Shipping Corporation of India Ltd, once India’s largest shipping company, reported a 48.81% decline in net profit to ₹124 cr in the quarter ended September.

“Concurrent restrictions on G7 insurance and financing, a delayed rollout of the price cap, and Russia’s aversion to selling into western policy constraints will combine to create an initial shortage of ships and buyers required to re-route roughly half of the 2 million b/d," S&P Global’s chief geopolitical risk advisor said in a note.

Russia’s seaborne crude exports were little changed in November at just over 3 million barrels per day (b/d) after flows to India surged to a record high, absorbing barrels displaced from Europe where imports sank to all-time lows ahead of the European Union’s 5 December import ban and G7 price cap, S&P Global Commodity Insights said.

“While Russian crude flows to the EU slumped 308,000 b/d to average a record low of 464,000 b/d in the month, Indian refiners stepped up their buying of Russian oil by 272,000 b/d to a record 1.17 million b/d," S&P said.

To avoid dependency on the ban on insurance services and tanker chartering in the European Union and UK, Novak offered India cooperation on leasing and building large-capacity ships, the Russian statement said.

The executive body of the European Union has asked its 27 member-countries to cap the price of Russian oil at $60 a barrel as part of the West’s attempt to squeeze Moscow’s oil revenues and limit its ability to wage war in Ukraine while keeping global prices and supplies steady. From 5 December, western shipping and insurance companies are prohibited from handling Russian oil sold above the price cap.

At a meeting, India and Russia noted the record growth in bilateral trade and expressed the desire to continue this interaction, increasing cooperation on trade in energy resources, such as oil, petroleum products, liquefied natural gas, coal and fertiliser. Between April and September, India’s exports to Russia stood at $1.29 billion, compared with $3.25 billion during the last financial year.

Imports from Russia, however, have grown fivefold in the first five months of the fiscal to $17.23 billion. Russia has for the second month in a row remained India’s top oil supplier in November, according to energy cargo tracker Vortexa. (Live Mint)