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(Bloomberg) — President Donald Trump’s threat to impose financial penalties on Russia has put the spotlight on the two biggest buyers of Moscow’s crude — India and China — but markets remain skeptical of disruption, for now.
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India became a major importer of Russian oil since the invasion of Ukraine in early 2022. More than a third of overall purchases have been from the OPEC+ producer this year, compared with less than 1% prior to the war, according to data from Kpler. China’s imports have also climbed over the same period.
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Still, the initial reaction from the market to Trump’s remarks was nonchalance. Global benchmark Brent fell almost 2% to close below $70 a barrel on Monday, suggesting little concern around the potential impact to crude flows.
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Trump said penalties would come in the form of “secondary tariffs,” without providing details, and would be implemented in 50 days if Russia doesn’t end hostilities with Ukraine. Matt Whitaker, the US ambassador to NATO, said the action effectively represents sanctions on nations buying Russian oil.
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Whitaker specifically cited India and China.
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Russian flows to India reached 2.1 million barrels a day in June, the biggest monthly intake in nearly a year, and close to the record set in May 2023, data from Kpler show. China’s purchases haven’t accelerated at the same pace, but have been consistently above 1 million barrels a day since the war.
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“If push really comes to shove, and India cannot buy any crude oil from the Russian system, then India has optionality with the other OPEC members,” said Mukesh Sahdev, head of commodity markets at Rystad Energy A/S. But “it will be at a higher cost,” he added.
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Barrels from the Middle East and Africa could help plug the gap of lost Russian supply, but the crude would be more expensive. Imports from Saudi Arabia in May were $5 a barrel higher than those from Russia, while shipments from Iraq were about 50 cents more pricey, according to official data from India’s Ministry of Commerce and Industry.
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—With assistance from Rong Wei Neo and Rakesh Sharma.
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English (US)