Reasons Of India Lapping Up Cheap Russian Oil Amid Ukraine Crisis

As Western sanctions intensify, Russia is looking for new markets for its oil exports, and India has been taking advantage of lower prices to increase imports from the country.

Although these oil supplies do not breach sanctions, the US has stated that “support for Russia…is support for an invasion that is clearly having a terrible impact.”

India is the world’s third-largest oil consumer, behind the United States and China, with almost 80% of its oil imported.

India imported roughly 12 million barrels of oil from Russia in 2021, accounting for only 2 per cent of its overall imports.

Last year, the Middle East provided by far the most supplies, with considerable amounts also coming from the United States and Nigeria.

India did not import any oil from Russia in January and February.

According to figures published by Kpler, a commodities research firm, contracts for March and April have already hit six million barrels.

Even if India purchases more oil from Russia, the government claims it will “still be a drop, literally a drop, in a larger bucket” of its overall oil imports.

Russia’s Ural crude oil now has fewer consumers as a result of its invasion of Ukraine, and its price has decreased.

“While we don’t know the exact price that India is paying, the Urals discount to Brent crude [the global benchmark] in the last week has widened to about $30 per barrel,” says Matt Smith, an analyst at Kpler.

Normally, the prices of these two forms of oil are comparable.

However, as the price of Urals continued to fall in March, the difference between them reached an all-time high, he says.

So “India and China are likely to purchase at least some of this [Russian] crude at a significant discount,” he says.

Because of Russian bank sanctions, India’s big refining corporations are having a hard time financing these discounted acquisitions.

It’s a problem that affects both sides of commerce.

According to Bloomberg, Indian exporters to Russia are reportedly awaiting payments worth around $500 million.

One of the solutions India is considering is a local currency transaction system, in which Indian exporters to Russia are paid in roubles rather than dollars or euros.

According to Refinitiv analysts, India’s oil imports from the US have increased dramatically since February.

Market analysts, however, believe that this will not be sustainable in the future, as the US aims to replace Russian oil supply with its own domestic production following Russia’s invasion of Ukraine.

There is also talk of resuming trade with Iran through a barter system in which Indian oil refiners would buy Iran’s oil. When the US reimposed sanctions on Iran three years ago, this arrangement came to an end.

However, without a wider agreement in international negotiations with Iran over its nuclear programme, this is unlikely to resume.

(Adapted from

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability

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