Discounted crude oil from Russia: Oil-sufficient countries need not advise on Russian imports, says India

India’s sharp reaction comes at a time when Indian Oil Corporation (IOC), the country’s top oil firm, has bought 3 million barrels of crude oil that Russia had offered at a steep discount on prevailing international rates. The purchase, made through a trader, is the first since Russia’s February 24 invasion of Ukraine that led to international pressure to isolate the Putin administration.

Russian oil exports to India, the third largest energy consumer, quadrupled in March, Financial Times reported Friday.

Russia has so far exported 360,000 barrels of oil a day to India in March alone, nearly four times the 2021 average. The report cited Kpler, a commodities data and analytics firm, to say that Russia is on track to hit 203,000 barrels a day for the whole month, based on current shipment schedules.

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Sources in Delhi said “countries with oil self-sufficiency or those importing themselves from Russia cannot credibly advocate restrictive trading. India’s legitimate energy transactions should not be politicised.”

India is highly dependent on imports for meeting its energy requirements. “Nearly 85 per cent of our crude oil requirement (5 million barrels a day) has to be imported,” a source said.

Most of the imports are from West Asia (Iraq 23%, Saudi Arabia 18%, UAE 11%). The US has also now become an important crude oil source for India (7.3%). Imports from the US are expected to increase substantially in the current year, probably by around 11%. Its market share will be 8%.

Referring to the current situation owing to sanctions on Iran and Venezuela, the source said, “Geopolitical developments have posed significant challenges to our energy security. For obvious reasons, we have had to stop sourcing from Iran and Venezuela. Alternative sources have often come at a higher cost.”

“The jump in oil prices after the Ukraine conflict has now added to our challenges. The pressure for competitive sourcing has naturally increased,” the source said.

“Russia has been a marginal supplier of crude oil to India” as it is “less than one per cent of our requirement, not among top 10 sources,” the source said. “There is no G2G (government to government) arrangement of import.”

Russian oil or gas is being procured by various countries across the world, particularly Europe. “75% of Russia’s total natural gas exports is to OECD Europe (like Germany, Italy, France). European countries (like The Netherlands, Italy, Poland, Finland, Lithuania, Romania) are also large importers of Russian crude oil,” the source said.

“Notably, recent Western sanctions on Russia have carve-outs to avoid impact on energy imports from Russia. Russian banks that are the main channels for European Union payments for Russian energy imports have not been excluded from SWIFT,” the source said.

“India has to keep focusing on competitive energy sources. We welcome such offers from all producers. Indian traders too operate in global energy markets to explore best options,” the source said.

On Thursday, India did not rule out buying discounted crude oil from Russia, saying it looks at all options at all points of time as a major importer of oil.

Arindam Bagchi, spokesperson for the Ministry of External Affairs, said, “India does import most of its oil requirements, it’s met by imports. So we are always exploring all possibilities in global energy markets because of this situation that we face importing our oil requirements.”

Bagchi said Russia has not been a major supplier of crude oil for India. “Let me just highlight that a number of countries are doing so, especially in Europe, and for the moment, I will leave it at that. We are a major oil importer and we are looking at all options at all points, we need the energy,” he said.

Asked whether the purchase can be made under the Rupee-Rouble arrangement, Bagchi said he was not aware of the exact details on the offers.