In May 2023, India completed 14 months of ramping up discounted Russian crude oil imports. According to an exclusive report by the Indian Express, in this period, India saved at least USD 7.17 billion in foreign exchange. Data shows that the total oil import during this period was worth USD 186.45 billion. If India had paid the average price of all other suppliers combined to Russian suppliers, the total cost of crude oil imports would have been USD 193.82 billion. Notably, Russia started supplying discounted crude oil to India after Western countries imposed sanctions in the backdrop of Russia’s military action on Ukraine.
India is the world’s third-largest consumer of crude oil. Only 15 per cent of the crude oil needs are fulfilled by the Indian suppliers. The remaining 85 per cent of the oil is imported from different suppliers including Saudi Arabia, Iraq and Russia. Before the war broke out between Russia and Ukraine in February 2022, Russia was a marginal player in India’s oil trade. In just 14 months, it has become the largest supplier for India.
As per the data available, India imported crude oil worth around USD 40 billion from Russia in these 14 months. The average price of Russian crude for Indian refineries was USD 79.75 per barrel. Compared to non-Russian suppliers, the price was around USD 14.5 lower per barrel. That means oil imported from Russia was around 15.3 per cent cheaper compared to other supplying nations.
Major beneficiaries in the overall foreign trade were five refineries named Indian Oil Corporation, Reliance Industries, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, and Nayara Energy. Till May 2023, 2.06 billion barrels or 280.41 million tonnes of crude oil were imported from Russia. That makes around 24.2 per cent of the total imports. Russia has left behind large suppliers Iraq and Saudi Arabia that now provide 21 per cent and 16.4 per cent of the total oil needs of India.
After Iraq and Saudi Arabia, the largest suppliers include the UAE (fourth largest), the United States (fifth largest), and Kuwait (sixth largest). Russia has provided an average of 10 per cent lower price per barrel in the case of Iraq, 11.7 per cent in the case of the US, 15.4 per cent in the case of Kuwait, 19 per cent in the case of Saudi Arabia, and 22.1 per cent in the case of UAE.
The Indian Express report suggested that the effective discount is not as high as initially anticipated. The higher cost of freight and insurance for Russian crude could be the reason behind the lesser effective discount. The cost of both freight and insurance has skyrocketed in the background of the sanctions imposed on Russia by Western countries.
India’s interest top priority
In the last 14 months, western countries have repeatedly pressured India to stop buying oil from Russia as according to them it would help Russia in the war against Ukraine. However, the government of India refused to bend to the demands saying the interest of the people of India is the top priority. Minister of External Affairs Dr S Jaishankar has bluntly defended India’s stand on buying Russian crude oil. He has clearly said that for the Government of India, the interest of the people of India is the top priority. He criticised the West for putting pressure on India to reduce trade with Russia amid the ongoing Russia-Ukraine war. In May this year, replying to the remarks of the European Union Foreign Policy chief called for action against Indian refined products from Russian crude. Union minister S Jaishankar advised him to look at EU Council regulations that say Russian crude transformed substantially in a third country is not treated as Russian crude as per their own regulations.
In September 2022, Finance Minister Nirmala Sitharaman said the overall oil import basket from Russia increased from 2 per cent to 13 per cent. Praising PM Modi she said, “”I respect the PM for his courage to get it (crude oil) from Russia because they are willing to give on discount… our entire import had 2 per cent of Russian component, it was ramped up to 12-13 per cent within a couple of months.”
She added, “Sanctions, sanctions but countries are finding their own way to get that Russian crude, gas…I give credit to the statesmanship of the Prime Minister to make sure globally that we did keep our relationship with all countries but he yet managed to get the Russian fuel which is what Japan is doing today.”
