India is a strategic partner of the West, particularly the United States, yet it continues to buy crude oil from Russia.
Indian Prime Minister Narendra Modi is apparently ignoring America’s efforts to squeeze Russian President Vladimir Putin over his Ukraine misadventure. India is buying crude oil from Russia at an increasing pace. And its purchases of Russian coal have spiked in recent weeks, despite global sanctions on Russia.
According to two sources and data reviewed by Reuters, traders are offering discounts of up to 30 per cent.
India’s purchases from Russia must be particularly galling for the U.S.
Despite the ban on Russian oil and other products entering the U.S., a “significant” share of Russian crude oil is being re-exported to America and Europe through refineries in India, according to the National Post, citing a report from Helsinki-based think-tank Centre for Research on Energy and Clean Air (CREA).
Compared to a meagre 277,000 barrels a day in April, the average daily rate of Russian oil exports to India in May stood at 819,000 barrels, oilprice.com said. According to analytics and data company Kpler, India has already imported five times as much Russian crude as it bought in all of 2021. That’s 60 million barrels so far this year compared to 12 million in all of 2021.
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Around 800,000 barrels a day of Russian oil has been redirected from Europe to India, Rystad Energy analyst Claudio Galimberti said.
“India is providing an outlet for Russian crude oil to get through the market,” Lauri Myllyvirta, a lead analyst at CREA, told AP.
Indian exports of oil products such as diesel have risen to 685,000 barrels a day from 580,000 barrels a day before the invasion of Ukraine. Much of its diesel exports are sold in Asia. Yet bypassing sanctions and overcoming hurdles, about 20 per cent was shipped via the Suez Canal to either Europe or the United States, Myllyvirta said.
India’s Russian purchases are “causing frustration in Western countries, which are paying higher prices for oil in part due to efforts to restrict Russian export revenue that is being used to wage war,” the Financial Times reported last week.
“People are realizing that India is such a refining hub, taking it at such a cheap price, refining it and sending it out as clean products because they can make such strong margins on that,” said Matt Smith, a lead analyst at Kpler who tracks Russian oil flows. Nearly half the oil refined in Jamnagar, India’s largest buyer of Russian oil, is shipped outside the country.
While most refiners in the West have shunned Russian crude and avoided exploiting the situation, India continues to brazenly do so, making a windfall in the process. India is getting Russian crude at a steep discount – around 30 to 35 per cent below market prices.
Attempts to discourage India from buying Russian crude in such large volumes haven’t met with much success. In late May, Indian officials insisted they would continue. “We will get cheap oil from Russia,” Reuters quoted officials saying. A rupee-ruble trade mechanism to facilitate the transactions is being discussed.
So Russian crude oil exports have held steady, despite sanctions over the Ukraine conflict, much to America’s consternation.
America’s top energy adviser has asked India not to buy too much Russian oil, warning it to be careful not to look like it’s taking advantage of the invasion of Ukraine.
Amos Hochstein, the U.S. special envoy for energy affairs, told senators during a hearing that Russia is making more money from oil and gas exports than it was before the war, thanks to the jump in prices.
India’s strategy seems to be significantly undermining America’s efforts to put the squeeze on Russia.
Hochstein told a U.S. Senate subcommittee on Europe and regional security co-operation that he had spoken to Indian officials. “In my conversations with them, I’ve said: ‘Look, we don’t have secondary sanctions, we can’t ban your purchases. But as you increase your purchases from Russia, I would ask two things:”
“‘One, don’t go too far, and don’t look like you’re taking advantage of the pain that is being felt in European households and in the United States.’
“‘Second, make sure you negotiate well. Because if you don’t buy it, nobody else is, so you have an advantage here.’”
Hochstein said Russia is bringing in more revenue from energy exports than before the war.
Despite tightening the screws, efforts to stop India from buying large volumes of Russian crude don’t seem to be gaining much traction. And so India continues to make the best of both worlds.
Toronto-based Rashid Husain Syed is a respected energy and political analyst. The Middle East is his area of focus. As well as writing for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has provided his perspective on global energy issues to the Department of Energy in Washington and the International Energy Agency in Paris. For interview requests, click here.
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