The CEO of Russian oil major Rosneft has proposed using the Asia-focused Dubai oil price benchmark for its flagship Urals crude, Kommersant reported on Wednesday, citing sources familiar with the matter.
The Urals price is currently pegged to the Brent blend, which is earmarked mostly for Western markets. But while Moscow is shjifting oil sales towards Asia, Rosneft CEO Igor Sechin has sent a letter to Russian Prime Minister Mikhail Mishustin proposing to tie the calculation of oil taxes to the Dubai benchmark, the outlet said.
The Finance Ministry has confirmed the letter from Sechin, saying that it was "working through" this idea.
Both crude benchmarks are denominated in US dollars and are set by S&P Platts, a unit of the US-based S&P Global Inc. But Brent grade is mostly used by European oil majors and traders, while the Dubai standard is influenced by Asian and Middle Eastern oil trading.
"The fact is that demand in Europe and the US for Russian oil is now only indirectly relevant," the head of analytics at Renaissance Capital, Boris Sinitsin told the outlet.
Russia has been rerouting its energy supplies from traditional markets in Europe to Asia, mainly India and China, since the West imposed sanctions, including an embargo on seaborne crude imports accompanied by price caps on oil and petroleum products originating from Russia.
Since the beginning of 2022 the share of seaborne exports of Urals to the EU has plummeted from 80% to 6%, while supplies to the Asian markets have surged from 10% to 87%, according to official data.
Sechin said in February that the price of Russian oil should be determined outside Europe, since Asia has emerged as the largest buyer of the country’s crude following Western sanctions.
"If Russian oil does not enter the European market, then there is no reference price. Reference prices will be formed where oil volumes actually go," he argued.
Rosneft switched to Dubai quotes in April in its latest deal on Russian oil deliveries with India's top refiner Indian Oil Corp (IOC). So far Rosneft is the only Russian oil company that has abandoned Brent-linked pricing. Industry experts say it is just a matter of time before other Russian companies follow suit.
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