Why Indian Government Is Buying More Russian Oil?

The invasion of Ukraine in February, India faced economic pressure to separate itself from Russia. However, it has justified its ongoing purchase of Russian oil.
Why Indian Government Is Buying More Russian Oil?
Indian Government buying more russian oil

According to the most recent shipping statistics, India's imports of Russian crude oil have increased significantly.

Following the invasion of Ukraine in February, India faced economic pressure to separate itself from Russia. However, it has justified its ongoing purchase of Russian oil.

What is the source of India's oil Import?

After the United States and China, India is the world's third-largest user of oil, with more than 80% imported.

According to Kpler, a commodities research firm, Russia will account for only around 2% of total oil imports (12 million barrels of Urals crude) in 2021.

Top oil suppliers for India

The vast majority of supply came from Middle Eastern oil producers, with substantial amounts also coming from the United States and Nigeria. In addition, India did not import any oil from Russia in January or February.

However, tanker monitoring statistics from May reveal that Russian oil shipments to India have surged dramatically, ranking second only to Iraqi imports.

Top oil suppliers for India

According to Kpler, the amount of Urals oil contracts made for India spanning March, April, May, and June - roughly 52 million barrels - is now greater than the whole amount ordered in 2021.

Why Indian government buying oil from Russia?

At a time when global energy costs are rising, India has taken advantage of lower pricing to increase its imports from Russia.

Although these oil shipments do not breach sanctions, the US has stated that "support for Russia...is support for an invasion that certainly is having a terrible impact."

During a visit to Delhi in March, UK Foreign Secretary Liz Truss encouraged India to lessen its reliance on Russia, which coincided with a visit by Russian Foreign Minister Sergei Lavrov.

Mr. Lavrov informed his Indian colleagues that Russia was open to discussing any commodities that India wished to purchase and insisted on payment in roubles.

What deal exactly India is getting?

Following its invasion of Ukraine, Russia's Ural crude oil has fewer clients, with some international governments and enterprises opting to avoid Russian energy exports, and its price has decreased.

While the specific price of the shipments to India is unknown, according to Matt Smith, an analyst at Kpler, "the discount of Urals to Brent oil [the global benchmark] remains about $30 per barrel."

These two forms of petroleum often trade at comparable prices.

As the price of Urals crude continued to fall in March, the disparity between them hit an all-time high, he says.

Since then, the pricing disparity has persisted.

According to Matt Smith, "India is expected to acquire at least part of this [Russian] crude at a big discount."

What effect do financial sanctions have?

Although the price is appealing, India's major refining businesses are having difficulty financing these acquisitions due to Russian bank restrictions.

It's a problem that affects commerce in both directions.

One possibility being considered by India is a transaction system based on local currencies, in which Indian exporters to Russia are paid in roubles rather than dollars or euros.

The US has expressed worries about this, stating that it might "bolster the rouble or weaken the dollar-based financial system."

Where else does India get its oil?

India's oil imports from the United States increased in February and March, but then decreased in April and again in May.

While India continues to purchase a huge quantity from Middle Eastern nations, Russia has seen the most significant growth in imports.

Foreign Minister S Jaishankar recently stated that sanctions imposed on other big producers like Iran and Venezuela had "squeezed every other supply of oil we have."

India has also refuted recent accusations that Russian crude bought by India was exported as refined goods to other nations, including the United States.

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