India Sends Diesel to China for 1st Time Since 2021 Amid US Tariffs & EU Sanctions: Report
In a rare move, India has shipped diesel to China for the first time since 2021, amidst ongoing trade tensions and sanctions imposed by the United States and the European Union. According to a report by Bloomberg, about five lakh barrels of diesel from Russia-linked Indian refiner Nayara Energy, which controls India’s second-largest refinery, is heading to China.
The cargo, which was initially bound for Malaysia, made a U-turn towards China’s Zhoushan, sparking curiosity and raising questions about the motivations behind this unusual shipment.
Nayara Energy is facing sanctions from the European Union, which imposed penalties on the company in June 2022 for violating international sanctions on Russia. The US has also imposed 50% tariffs on Indian exports, including diesel, in response to India’s refusal to vote in favor of a UN resolution condemning Russia’s invasion of Ukraine.
So, why is Nayara Energy sending diesel to China despite the sanctions and tariffs? The answer lies in the complexities of global trade and the need for refiners to maintain their market share.
Why India is sending diesel to China
India is one of the world’s largest oil refiners, and Nayara Energy is a significant player in the country’s refining sector. The company’s refinery in Vadinar, Gujarat, has a capacity of 400,000 barrels per day, making it the second-largest refinery in the country.
In recent years, India has been facing a shortage of diesel, which is a crucial component of the country’s economy. Diesel is used extensively in the transportation sector, agriculture, and construction, among other industries. The shortage has led to a surge in diesel prices, making it an attractive export option for refiners like Nayara Energy.
China, on the other hand, is the world’s largest importer of diesel, and its demand is expected to continue growing in the coming years. The country’s economic growth, infrastructure development, and pollution control measures have all contributed to its increasing demand for diesel.
By sending diesel to China, Nayara Energy is not only generating revenue but also maintaining its market share in the global refining sector. The company has a long-term contract with China’s Zhoushan Petrochemical Refining and Chemical Co. Ltd., which provides a stable outlet for its diesel exports.
The impact of US tariffs and EU sanctions
The US tariffs on Indian exports, including diesel, have made it more challenging for Indian refiners like Nayara Energy to export their products to the US market. The tariffs, which were imposed in response to India’s refusal to vote in favor of a UN resolution condemning Russia’s invasion of Ukraine, have increased the cost of Indian exports to the US.
The EU sanctions on Nayara Energy, on the other hand, have restricted the company’s ability to access the European market. The sanctions, which were imposed in June 2022, prohibit European companies from doing business with Nayara Energy, making it difficult for the company to export its products to the region.
By sending diesel to China, Nayara Energy is circumventing the US tariffs and EU sanctions, which has allowed the company to maintain its market share and generate revenue.
Conclusion
The shipment of diesel from Nayara Energy to China is a rare move, especially given the ongoing trade tensions and sanctions imposed by the US and EU. However, it highlights the complexities of global trade and the need for refiners to maintain their market share.
India’s decision to send diesel to China demonstrates its willingness to engage in international trade and maintain its position as a major player in the global refining sector. The shipment also underscores the importance of China as a market for Indian exports, particularly in the energy sector.
As the global energy landscape continues to evolve, it will be interesting to see how India and other major oil-producing countries navigate the complex web of trade tensions, sanctions, and market demands. One thing is certain, however – the shipment of diesel from Nayara Energy to China is a significant development that has far-reaching implications for the global energy sector.
