Russia slashes LNG prices by 40% for Asian buyers
What's the story
In a bid to capitalize on the global natural gas supply crisis, Russia is trying to sell liquefied natural gas (LNG) from its US-sanctioned facilities to energy-starved South Asia. The shipments are being offered at a whopping 40% discount on spot prices through little-known intermediary companies based in China and Russia. The sellers have also offered to provide paperwork to make it appear that these shipments originated from non-Russian sources such as Oman or Nigeria, as per Bloomgberg.
Market impact
Closure of Strait of Hormuz disrupts global gas market
The closure of the Strait of Hormuz and attacks on Qatar's LNG export plant have disrupted 20% of global supply, affecting the gas market and driving up prices. This has led to a halt in shipments from Qatar, forcing countries like Bangladesh and India to seek costlier alternatives. Bangladesh, which relied on Qatar for 60% of its LNG last year, has been buying from the spot market at times paying double what it would have under long-term contracts with Qatar.
Import strategy
India yet to take Russian LNG from sanctioned projects
India has been cautious in importing sanctioned oil and gas. The Indian government has previously said that it won't take Russian LNG from blacklisted projects. However, India did buy its first Iran oil shipment since 2019 after a US Treasury general license was issued last month waiving restrictions. Despite this, most buyers are still hesitant to take restricted shipments for fear of retaliation from Washington.
Export expansion
Russia seeks to expand LNG exports to other countries
Russia has been steadily increasing exports from its US-sanctioned export plants, Arctic LNG 2 and Portovaya. China is the only country to have imported the sanctioned Russian LNG via a network of shadow fleet vessels. Expanding deliveries to countries outside China could help Russia diversify its customer base and increase exports from its blacklisted facilities.