India’s oil purchases from Russia have risen sharply after the invasion of Ukraine in February 2022, with total imports reported to have surged tenfolds last year, despite efforts by the West to convince nations around the world to isolate Russia. A report by BBC said that Russian oil accounted for just 2 per cent of India’s annual crude imports in 2021, but the figure now stands at almost 20 per cent, according to state-owned lender Bank of Baroda.

India’s purchases of oil from Russia during the last financial year, saved it around $89 per tonne of crude, said the report. Western nations including the US, UK, along with Ukraine and its allies have cut Russian oil imports, and seek to isolate the country by limiting the amount of revenue that it earns from selling oil across the globe.

Amid all this, India has been lauded for its ‘self confidence’ despite initial pressures from the US for buying up Russian oil. Chris Wood of global investment banking firm Jefferies wrote in his GREED & fear newsletter that India’s “increased national self-confidence” has been manifested on the world stage in the past year and more in regards to its purchasing of cheap Russian oil.

Wood said that despite initial pressures from the US on New Delhi, the Modi government “has been consistent in its public stance that it will continue to act in its own national self-interest, which is to buy cheap Russia oil.”

“This stance was helped by the understanding that as the next big domestic market for American companies, such as Apple, to target it makes no strategic sense for Washington to pick fights with both Beijing and Delhi,” he added.

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China, India catch Russian oil above ‘price cap’

India and China have snapped up the vast majority of Russian oil so far in April at prices above the Western price cap of $60 per barrel. India accounted for more than 70 per cent of the seaborne supplies of the Urals crude grade in April and China for about 20 per cent, according to Reuters.

India’s oil imports from Russia have grown from 1.12 million tonnes in April 2022 to 7.81 million tonnes in March 2023 after the Russia-Ukraine war, according to Jefferies.

In December 2022, the Group of Seven (G7) wealthy nations and European Union (EU) introduced a price cap plan aimed at limiting the revenue Russia earns from its oil exports, by trying to keep it below $60 a barrel. The EU also stopped imports of Russian oil by sea, and banned the import of refined petroleum products from Russia.

Despite pressure from the US and Europe, India refused to adhere to Western sanctions on Russian imports. The world’s third largest oil importer defended its purchases, saying that as a country with millions living in poverty which is reliant on energy imports, it could not have paid for higher prices.

How Russian oil is used in India

India, the second largest consumer of oil in Asia, is better located to buy Urals than China because of a shorter transport route, and its refineries are well-suited to processing Russian oil. The country has 23 oil refineries refining 249 million tonnes of oil a year, making it the world’s fourth-biggest refiner.

Gujarat-based Reliance Industries is the world’s largest refinery, which has ramped up purchases of Russian oil. Together with India’s second-largest refiner Nayara — of which Russia’s Rosneft owns 49 per cent — Reliance imports 45 percent of Russian crude that comes into India, according to cargo tracking firm Vortexa.

Much of the refined oil product goes to customers in India, however, the country has also emerged as a major supplier to Europe and elsewhere. India’s petroleum product exports to the European Union rose 20.4 percent year on year between April and January to 11.6 million tonnes, according to a report by news agency AFP.

Impact on Russia’s revenue

India’s role will “only become more central to a global oil map that’s been redrawn by Vladimir Putin’s year-long war in Ukraine” as Europe ramps up its sanctions, according to a Bloomberg report published in February.

Despite India’s purchases, Russia is still earning less than it did prior to the invasion from its oil exports — in part because of the additional cost and difficulties such as obtaining insurance to ship its crude halfway around the world.

Russia’s oil exports in April went by volume compared with a year ago, but its revenues have fallen by 27 per cent, according to estimates by the Paris-based International Energy Agency.

“The world will have a very hard time to live without Russian oil,” Vortexa chief economist David Wech told AFP, saying cutting Moscow out completely would cause a “deep recession”.

Source: Livemint