Working with Russia doesn't pay off. On Russian propaganda about large oil profits.

You've most likely heard, or you've read, about how large Russia is avoiding oil sanctions utilizing a mythical fleet of shadows. How he earns coconuts, bypassing price cap for oil and mostly laughter and ridicule from the west, etc. Yes, he does, and we wrote about it in our social media. First of all, the scale is not as astronomical as it sometimes seemed. Secondly, oil does flow, but it earns not the Russian budget, but intermediaries who make their fresh fortunes. Thirdly, there is simply a voluptuousness in this marketplace and any pirate acts. erstwhile you cheat on individual who cheats, the deceived can't study your fraud due to the fact that he tried to cheat himself. Do you understand?

We're dealing with dozens of recently established bush companies, empty offices and unpaid invoices. Yes, you understand. It happened to send a tanker with oil, ordered by the company bush e.g. in the UAE. Discharge this oil and then receive no payment for it. The bush company is disappearing. Service or criminal groups can be active in these interests. A chaotic west to the east. Many books or films will be made after years of fortunes. But to a large degree it's not the Russian budget, which inactive counts more and more reductions in profits in the oil trade all month.

The West, though cold, consistently tightens its loop and tries to introduce fresh restrictions. But this is done in stages. Why? For a simple reason. We are dealing with a scale and an opponent so far unprecedented. We are talking about a large supplier, a large political influence and who has routes spread across 2 continents. In addition, 2 countries that are willing to buy oil have a full of nearly 3 billion people and thousands of companies who can participate in attempts to circumvent sanctions. Since the beginning of the war India has more than 30 times increased Russian oil imports, despite Western calls to join sanctions for war in Ukraine. According to Reuters, in April 70% of sea exports from Russia went to the Indian market. Russian enthusiasts take delight in saying that this would mean a failure of the West. However, forgetting that it is not the quantity that counts but the margin. And this 1 is hopelessly low (as we see in the proceeds to the Russian budget). Despite many attempts to translate, calculate and show accurate data from Russian offices, there is inactive a communicative in our but besides Western media about Russia's large strategical movement. So I'm going to effort to explain the mechanics as simply as I can before I get to the latest information.

Firstly, transport is an crucial factor. Russia sends oil to India mostly from European ports and ports at black sea. Yes, I know, on the planet map, it looks like they can send from a million places, and most of them come from these two. These ports have a good capacity and a logistical line from oil deposits to these ports. Below the map where it flows and where it flows. It is crucial to realize that the longer the way the more costly freight and insurance. Remember this due to the fact that in the end there will be a alleged cherry on the cake concerning the teg aspect.

Math for the resistant.

VERSION WITHOUT SANCTION - before the war - State budget for 2023 was counted at the price of oil 70-75$. Logistics? Pipelines or shipping across Europe. inexpensive insurance, low freight.

If you sale 100 barrels of oil to Europe, it's $75/ barrel, you have $7500 in your pocket.

If the cost of extracting a barrel cost you $40,500 – $4,000 = $3,500 margin for which you can buy a weapon for war.

VERSION WITH SANCTIONS – The marketplace created confusion, Americans freed oil reserves. The price of the barrel began to fall. A price cap of $60 per barrel of Ural oil (Russian) was introduced The price on Urals is now around $54-55.

If you're selling 70% of your oil to India, let's get back to the map. See that distance? Freight and insurance prices are rising. In addition, India has negotiated discounts up to 30% calculated according to the peculiar equation in which the price of Urals, Brent, average for the past months and most likely just rebates. Everything is covered in trade secrets and each organization may have a somewhat different contract. But there is 1 very crucial detail. The freight + insurance price reached inactive late $20 per barrel and now dropped to about $12. And the Hindus freight and insurance want in the acquisition price. Why? Who is liable for transport is besides liable for possible environmental damage. India's putting this work on the seller.

So let's effort our equation of 100 barrels of oil at $54 on the stock marketplace + $10 to $10 for insurance and freight exceeds on price cap. And it gives us over $60. But you know what? The price on the place marketplace is simply a stock price. You come to buy oil, you can buy it for that or that. But... the contracts with India are long-term and are negotiated so as not to exceed the supply of +oil + insurance cap of $60/barrel. Above that, they won't get a credit company in Indian banks, and insurance companies won't want to safe the transaction.

So we have $60 – $10 minimum (and oil should be even cheaper so India can do business and sale it again, for example, to Europe) But let's just leave the ultra-optimistic variant for Russia.

So we have 100 barrels of $50. So that's $5,000.

The cost of mining is inactive $4,000 so they have an optimistic margin – $1,000 alternatively of $3500. I truly can't realize how individual can't realize that by now.

But besides due to the fact that that's not all: You were paid in a dollar before, and now in a rupee. I'm sending back to erstwhile entries what that means. But it's even funnier. erstwhile you were selling to Europe, the money was moving smoothly and on time. And now the $1,000 in rupees can wait 2-3 months.

This is more or little the image of trade with India. And it's the legal 1 (because the United States is actually trying to buy oil from Russia, just to keep the price cap $60) As for the amounts of oil rebates, and the cost of extraction, do not stick to them rigidly, there may be differences depending on the fields from which oil is produced, and what contract with India is presently being performed. It can be liquid and profits can hesitate. But if you're falling profits from the sale of oil over 50% in the budget, and we've proven it, you can easy do it yourself.

We have another way. It's called a fleet of shadows. What's this all about? There's an Indian company. He's got a tanker fleet. He's volunteering to buy to Russia. He buys oil from Russia, then sells as oil from another place on earth and wants to sale it above price cap. Yeah, things like this can happen. But it won't sale over $70-75 due to the fact that that's what the price of Brent or WTI oil is. So back to calculations, it operates at a price of $43 to $54 (this is how much Urals oil is presently listed on the stock market) Why would any company pay the Russians more than the stock marketplace value of this oil? Yes, he will, but little due to the fact that he wants to make money from it. And since the situation is simply a small shabby, he wants to make as much money as he can. I think it's more logical than that.

And now it is. respective specified companies took up cooperation and began trading with Russia after the introduction of price cap in December 2022. The largest of them is Gatik Ship Management registered in India. By the end of last year, it became the main barrel carrier from Russia. As reported by Reuters, he was just stripped of his tanker certificate at the British Lloyd’s Register.

The Mumbai-based company, which has accumulated a fleet with a full capacity of over 30 million barrels, will be stripped of certification for 21 tankers from June 3. Lloyd’s registry representatives said that “we are committed to facilitating the enforcement of Russian oil trade sanctions” and will not supply services to ships that violate them,” said Reuter spokesperson Lloyd’s.

Classification societies specified as Lloyd’s registry in London supply services specified as navigational capacity checks and certifications needed to safe insurance and port entry.

In total, Gatik Ship Menagment has a fleet of 48 tankers worth $1.4 billion. Almost all ships flew to Russian ports and exported oil or petroleum products. The company was in problem in April erstwhile insurance for its tankers was withdrawn by the Underwriters Club of America. It is part of the global Group of P&I Clubs, i.e. the IG P&I, which provides insurance for over 90% of the world's shipments. Gatik Ship Menagment has so been stripped of and insurance and certification for almost half of its fleet.

And again, I will run the fans of Russian miru and their claims that specified insurance or certification can be acquired in any insurance and certification store. Ingosstrakh, the main Russian maritime insurer, besides refused to cooperate with Gatik Ship Management. The company typical told the Reuters agency that her Prometheus oil tanker insurance expired in April and was not renewed. Ingosstrakh added that he was forced to reject any insurance applications from Gatik due to the risk. So we have situations where a 90% marketplace pier refuses, and the largest Russian insurer refuses. There are Indian companies that, as I mentioned above, do not insure oil over $60 with a shipment.

Will this halt the full process of the alleged Shadow Fleets? Of course not. But all period it gets harder.

Does this trade save the Russian budget in any way? Of course not. Pushing more oil, repeatedly lower margins and settling in little liquid currency saves nothing. It's barely an IV, and you request a transfusion.

Is Russia bypassing price cap and selling more costly oil by making money off of it? Of course not. If someone's making money, it's a middleman, not a Kremlin. Even a momentary fluctuation in Ural oil prices in the Moscow stock marketplace that would jump over $60 means nothing. due to the fact that that's the place price. For goods in the acquisition of ‘here and now’. Most transactions between Russia, China and India are concluded in long-term contracts. These countries have a fixed discount calculated according to a peculiar equation from just this stock price (but not necessarily from the price of Urals) but for so much of this oil they do not buy, of which many people inactive forget with a memory like a goldfish and posting information that for 2 days the price on the Urals oil exchange was $62 and the planet is falling apart. No- there's nothing wrong. So far, for nearly 180 days of price cap introduction for oil Urals, the stock exchange's amount of $60 exceeded the quotes only a fewer days.

I hope that this entry will explain the mechanisms of price cap operations and India and China's participation in this mechanism. You will besides realize what “shadow float” means, and how quotes on the Ural oil exchange work. You can go back to this article all time there's another media buzz about how one more time "the shadow float" and the clever Russians make a luck and everything is excellent. They don't. And blocking the largest supplier + a fewer weeks' journey (which is not much to talk about) will make a large confusion in the supply of oil from Russia erstwhile again.