Russian oil trade remains buoyant, the analyst said, as the EU’s price ceiling failed to stem Moscow’s revenue from freight and insurance.

  • Russian oil revenues may not have been hit as hard by Western sanctions as early data suggested, a Kpler analyst told Insider.
  • According to Victor Caton, Moscow earns much more from oil trading by providing additional services such as shipping and insurance.
  • “The Russia-India-China triangle does without Western shipping and Western insurance,” he said.

According to analyst firm Kpler, Russia’s energy revenues may not have been hit as hard by Western sanctions as some preliminary estimates suggest.

That’s because Moscow actually earns far more from its oil trading than just the so-called FOB value of the commodity, Victor Catona, an analyst with the company, told Insider.

It’s all about how Russia sells its oil to Asian buyers like India and China, charging oil traders extras like shipping and insurance along with its oil.

According to Cato, some early data indicated that Russian oil was worth about $38 a barrel — less than half the cost of the Brent benchmark — after Europe imposed a price ceiling on it and banned seaborne imports. However, Moscow’s real income from oil could exceed $60 a barrel when taking into account profits from related services it provides, he added.

“Refutation number one: no one really knows the price of Russian oil,” Katona said.

“The combination of own insurance, own shipping and mostly own resellers ultimately [means] the end [price] that the Russian company will receive from this transaction not 38 dollars, but 60-65 dollars, which no one talks about very much,” Katona said.

Russian oil flows have undergone major changes since the country’s 2022 invasion of Ukraine led to punitive economic sanctions from the West. This forced the country to look for new buyers for its oil, which led to a sharp increase in supplies to Asian countries such as India and China.

The European Union capped the price of Russian oil at $60 a barrel and banned ships carrying the commodity from using Western shipping and insurance companies unless they agreed to the price cap. The move was aimed at cutting Moscow’s energy revenues while maintaining its oil supplies through world markets.

According to Caton, the FOB price of about $38 per barrel only takes into account the cost of loading oil cargo in a Russian port and does not cover the entire chain of transactions between buyers and sellers. More importantly, it’s the cost to the end user, he said, adding that the price of shipping to India is about $25 higher than the FOB level.

“Indians do nothing. They don’t do shipping, they don’t do insurance. And basically the Russians are engaged in servicing this cargo, ”he said.

This ultimately highlights the failure of the EU price cap, Cato said, as it only affects the first part of the Russian oil deal.

“The marginal price as such and its ultimate failure is that it was never going to cap the price, the final consumer price, that the Indians or the Chinese would pay. She always kept the price only at the Russian port of loading,” he said.

“For the most part, what happens is that the Russia-India-China triangle is dispensed with using western shipping and western insurance,” he added, effectively undermining the power of the price cap.

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