The unexpected missile attack on a second India-bound ship carrying Russian crude, just three weeks after the first, has complicated matters for domestic refiners.
India now counts the Vladimir Putin-led nation as its biggest oil supplier, according to Paris-based market intelligence agency Kpler, and these attacks come on top of US sanctions since December, where vessels that bring crude to India are facing heightened scrutiny.
Panama-registered Pollux, which loaded crude at the Sheshkaris oil terminal in the Russian port of Novorossiysk on January 24, was scheduled to deliver the medium, sour Urals grade to Paradip port on February 28.
According to United Kingdom Maritime Trade Operations and the US State Department data, the tanker was struck northwest of Yemen’s Mokha port in the Red Sea.
The rebels had targeted the long-range 2 (LR2)-type tanker carrying around 628,000 barrels of Urals, with at least three missiles, and one had struck the vessel on the port side, according to a post by US Central Command (Centcom) on X (formerly Twitter).
Officials then said there were no casualties, and the vessel had continued its trip to India’s east coast.
On Sunday, a Kpler official said the vessel had not transmitted a signal over the past day, likely due to being hit by a missile.
State-owned refiner Indian Oil has a 300,000-barrels-per-day refinery at Paradip, with Russian state-owned Rosneft being the oil supplier, showed Kpler data.
If the attacks continue, Russian vessels may have to go around the Cape of Good Hope, increasing transit time by weeks and sending costs north, Indian refining officials said, expecting Moscow to intervene with Tehran to sort the issues.
For all cargo types, the decision to take longer and safer routes has resulted in higher trade costs for shipping and insurance, according to the UN Conference on Trade & Development (UNCTAD).
The incremental cost of diverting a tanker around Africa costs nearly $1million more per voyage.
For an Aframax tanker, similar in size to an LR2, costs surged by 110 per cent, according to LSEG Shipping Research.
A Mumbai-based refining official said there were no frantic calls from suppliers and no panic in the market on Saturday. Russian oil is still crossing the Suez, he added.
This was the second such attack in less than three weeks on a Russian oil vessel.
Late last month, the Achilles, a crude oil tanker managed by India's Gaurik Ship Management, was sailing to Sikka on India's west coast carrying Russian Urals when it was attacked.
The missile missed the vessel, and ship-tracking data showed that the cargo was delivered on February 1 at Jamnagar oil terminal.
“It is likely that the Houthis have no intention of attacking non-Israeli-related commercial shipping and that this was a one-off (incident),” said Tilak Doshi, a London-based energy expert.
“It is not in their interest to do so, as their benefactors in Iran — allied to Russia and China in global geopolitics — do not gain by such actions either.”
The Houthis continue to target Israeli-, American-, and British-linked shipping in the Red Sea and the Gulf of Aden.
So far in February, they have targeted five vessels, including Pollux, according to UK-based Ambrey, a maritime security agency.
Pollux had minor damage from the attack, Ambrey said.
Russia has good relations with Iran and can manage the Iran-backed Houthi rebels, said a state-run refining official.
Government officials said that India's support for Israel had turned the Hamas and the Houthis against India, a reason why they were targeting ships employing Indians and carrying goods to India.
India has since tried to strike a balance in the Israel-Palestinian conflict.
An industry official said some tankers, including Russian, carrying crude to India via the Suez do not show their destination as India.
But the Houthis are also looking at vessel ownership, and not just where they are headed, he added.
Affiliations with mainland China, Iran, and Russia have not completely negated attacks either, Ambrey said, referring to attacks on Achilles and a container ship owned by a Chinese company.
The uncertainty is taking its toll on freight costs and insurance, which may make Russian oil uncompetitive unless Moscow absorbs the higher costs and maintains existing discounts of $3-4 per oil barrel, a state-run refining official said.
India boosted its share of Russian crude imports to around 39 per cent of total purchases in 2023 from 16 per cent in 2022, despite warnings from Washington over potential sanctions violations.
Imports averaged 1.53 million barrels per day (b/d) in January, and 1.58 million b/d in February till February 18, shows Kpler data.
Imports have averaged around 1.5-1.6 million b/d since August after exceeding 2 million b/d in July owing to lower discounts, enhanced Western policing, output cuts by Russia and now the Red Sea conflict.
Washington has stepped on the sanctions pedal since October, targeting vessels that carry Russian crude, trading over the $60 per barrel cap imposed by the G-7 group of nations.
This has resulted in sanctions on Sun Ship Management in December and other entities in January and February.
While India has no issues buying Russian oil, it will not accept such fuel transported on sanctioned vessels to Indian ports, officials said.
