INDIA’S oil imports from Russia made up 33% of the country’s total seaborne oil imports last year, and 25% of Russia’s seaborne oil exports. 

If the new trade agreement between the US and India delivers on what president Trump has promised then VLCC owners could be looking at six-figure rates and Russia’s economic assumptions are in trouble.

But before any decisions are made, let’s consider the conditional ‘if’ doing a lot of heavy lifting in that scenario. 

If India replaces 500,000 barrels per day of Russian shadow supply with Venezuelan crude carried on mainstream tankers, VLCC spot rate assumptions move from $75,000 per day to $100,000 per day, argue the analysts. 

This uplift holds if China mainly switches from Venezuelan to Russian barrels within shadow trading, which would not materially reduce mainstream tanker demand, points out Clarksons Securities analyst Frode Morkedal. 

The net effect is smaller if India’s replacement flows are not fully mainstream. It only turns negative if China’s incremental Russian intake displaces meaningful volumes of long-haul mainstream crude into China. But the bigger swing factors here lie in how true these statements end up being. 

Announcing a trade deal is easy, but the detail is yet to emerge.

Trump has claimed victory before and announced that India was stopping Russian imports. That India is still importing more than 1m barrels a day is largely down to the fact that the price incentives often override politics. 

Yes, the US may wield significant political and economic influence over partners such as India, but Russian oil is today being offered at a discount of over $20 to Brent. 

That may not matter in the end, but before anyone makes any decisions it would be prudent to wait for reality to catch up with the rhetoric. This may not be new news to anyone, but after a year of Trump we have learnt that shipping needs to wait until the deals are signed before decisions are taken. 

In the container sector tariff threats don’t translate into big moves for shipping markets until they’re implemented. So far this year, it has been all rhetoric — a lot of rhetoric.

As we pointed out last week, that process generally begins with a social media post by Trump, and in some cases, an executive order. Material freight impact only emerges after there’s a Federal Register notice followed by a confirmation to shippers of a levy via the Cargo Systems Messaging Service.

Tariff talk unaccompanied by a CSMS alert is widely viewed as a negotiating tactic. Trying to read the tea leaves from Trump tweets and then forecasting shipping market effects, whether it's Russia-India or anything else, is a very hypothetical exercise.

Richard Meade
Editor-in-chief, Lloyd’s List

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