Expert: Russia’s oil discount could hit $24 per barrel as sanctions take effect

Russia’s recent issues with stranded tankers are expected to increase the discount on its oil, benefiting key buyers like China and India, according to experts.

Igor Yushkov, an expert at the National Energy Security Fund and the Financial University under the Russian government, told Russian media on January 14, 2025, that the ongoing situation with tankers could push Russia to offer deeper discounts on its oil exports, per Caliber.Az.

“Now the discount for buyers of Russian oil is about $10-13 per barrel of fuel. The discount may grow to $20-24 for some time,” he said. However, Yushkov emphasized that this fluctuation would not have a significant long-term effect on Russia’s economy. “This will do virtually nothing for the state. The discount will reduce the profitability of Russian oil companies mainly,” he explained.

Yushkov also pointed out that the issues surrounding the stranded Russian tankers were more beneficial for Russia’s key oil buyers, China and India, who are now in a stronger position to negotiate better terms. He said, "This just opened a window of opportunity for India and China, other buyers of Russian oil, to ask for a discount from Russia. This is what Beijing and Delhi are seeking."

The incident that prompted the discussions involved three tankers carrying more than 2 million barrels of Russian oil that became stuck in the Chinese port of Dongjiako. Bloomberg reported on January 13, 2025, that this delay was caused by the refusal of the port authorities to accept the vessels, which had fallen under the scope of US sanctions. This situation is exacerbated by the latest round of U.S. sanctions announced on January 10, 2025, that target major Russian energy companies, including Gazprom Neft and Surgutneftegaz, as well as over 180 vessels involved in transporting Russian oil.

These sanctions, part of the G7 nations’ broader efforts to curb Russian energy revenues, aim to reduce Moscow's financial capabilities amid ongoing geopolitical tensions. The sanctions also extend to individuals and companies who have dealings with Russia’s energy sector. “We are targeting those responsible for helping Russia continue its war efforts, and that includes limiting the revenues from its oil exports,” a US official stated on condition of anonymity.

In response to the new sanctions, Italy has voiced concerns about the potential for higher global energy prices. Italian officials warned that the restrictions could lead to increased costs in the energy market, further complicating the global supply chain.

Despite the temporary disruptions, Yushkov remained confident that the sanctions' impact would not be catastrophic for Russia. He noted that Russia would likely find ways to work around the sanctions and restore flows of oil, particularly to China and India, which have emerged as vital buyers of Russian crude in the wake of the Ukraine conflict. "The problem will be solved. Russia will find ways to continue its oil exports, and the demand from India and China will grow unless there is further tightening of sanctions,” Yushkov concluded.

By Tamilla Hasanova