India moves to curb China shipping links in oil trade

The Indian government has directed state-controlled oil companies to register the use of any vessels belonging to bordering countries, in its latest move to curb trade relations with China.

All such vessel charters must be registered with India's Department for Promotion of Industry and Internal Trade (DPIIT). The directive applies equally to shipping firms owned by Pakistan and Nepal — which have their own border disputes with Delhi — but in practice is only likely to affect Chinese shipping companies, which have a large global presence in the oil and gas tanker market.

The directive is the latest step taken by India following a serious border clash with China in the Ladakh region in June, which resulted in the death of 20 Indian soldiers and an unknown number of casualties on the Chinese side.

The new requirement is not an outright ban on the use of tankers belonging to India's neighbours. But the extra bureaucratic hurdle is likely to dissuade state-controlled oil companies from using Chinese-owned vessels to import and export of crude and petroleum products.

The Indian government already encourages oil companies to import oil and gas using domestic shipping firms, but limited Indian-owned tonnage means state-controlled companies often time charter or spot charter vessels from foreign shipowners.

The market impact of the latest move is likely to be limited. The new directive is not expected to affect India's ability to import or export oil and gas, given ample availability of tonnage in the international tanker market, especially as the Covid-19 pandemic curbs waterborne trade.

Indian state-controlled producers expanded their reliance on non-Indian ships for crude imports in 2017, after the government encouraged them to buy more long-haul US crude on a delivered basis. India's US crude imports rose by 49pc from a year earlier to 192,000 b/d in the April 2019 to March 2020 financial year, government figures show.

By Reza Amanat