Why India is buying more Russian oil
Image credit: BBC
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.
After the United States and China, India is the world’s third-largest oil consumer, importing about 80% of its oil.
In 2021, India imported approximately 12 million barrels of oil from Russia, representing only 2% of its total imports.
The Middle East provided by far the biggest supplies last year, with significant contributions also coming from the United States and Nigeria.
In January and February, India did not import any oil from Russia. Contracts for March and April have already surpassed six million barrels, according to numbers supplied by Kpler, a commodities research organisation. As a result of Russia’s invasion of Ukraine, there are fewer clients for Ural crude oil, and its price has dropped.
The prices of these two types of oil are usually comparable. However, as the price of Urals fell further in March, the gap between them widened to an all-time high, he claims.
India’s big refining businesses are having a hard time finding these reduced acquisitions due to Russian bank sanctions.
It’s a problem that impacts both the supply and demand sides of the economy.
Indian exporters to Russia are owing more than $500 million (£381.5 million), according to financial specialists Bloomberg.
A local currency transaction system, in which Indian exporters to Russia get paid in roubles rather than dollars or euros, is one of the possibilities India is contemplating.
India’s oil imports from the United States have surged considerably since February, according to Refinitiv analysts.
Market analysts, on the other hand, feel that this will not be sustainable in the future, as the US seeks to replace Russian oil supplies with domestic production in the aftermath of Russia’s invasion of Ukraine.
There has also been talking of restoring trade with Iran via a barter system in which Indian oil refiners would buy Iranian oil. This agreement came to an end three years ago when the US reimposed sanctions on Iran.
This is unlikely to happen again unless there is a wider deal in international negotiations with Iran over its nuclear programme.
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