Manas Dasgupta
NEW DELHI, March 18: In a rebuff of sorts to the American advice to India to re-think buying oil and gas from Russia in view of its invasion into Ukraine, India asked the United States and other western countries not to politicise its legitimate energy transactions and said India welcomed competitive offers from all energy producers to meet its own requirements.
Amid politics over oil trade, Iran’s ambassador to India also said on Friday that Iran was ready to meet India’s energy security needs as negotiations continue between the world powers and Tehran on the lifting of sanctions against the OPEC member. Iran used to be the second-largest oil supplier to India but New Delhi had to halt imports from Tehran after former U.S. President Donald Trump withdrew from the nuclear deal with Iran and re-imposed sanctions on its oil exports.
Official sources on Friday said the countries which were self-sufficient in energy sources (meaning the US) or those who themselves imported oil from Russia (hinting at large number of NATO allies who depended on Russian crude till the Ukraine invasion) have no credibility in advising India to restrict trade with Russia. “India welcomes competitive offers from all energy producers, including Russia, amid geopolitical developments that are posing significant challenges to the country’s energy security,” official sources said.
The comments came in response to the US advising India that while its importing discounted crude oil from Russia won’t amount to violating its sanctions, it would imply supporting the Russian invasion of Ukraine. The White House Press Secretary Jen Psaki had said India buying oil and gas from Russia would amount to support of Russian invasion while clarifying that it would not be a violation of American sanctions on Russia. “But also think about where you want to stand when history books are written at this moment in time. Support for the Russian leadership is support for an invasion that obviously is having a devastating impact,” Ms Psaki had said.
The assertion of India’s position came in the backdrop of increasing international demand on India to stop purchase of Russian energy. The issue is expected to feature in talks during Japanese Prime Minister Fumio Kishida’s March 19-20 visit for the 14th India-Japan summit. In a statement issued on Friday, Australian Prime Minister Scott Morrison said, Ukraine will be in the agenda during his virtual meeting with Prime Minister Narendra Modi on March 21. The issue is expected to arise also during the visit of British Foreign Secretary Liz Truss which is likely later this month. All the three countries — Australia, Japan and the UK — have imposed sanctions on Russia. The U.S. has increased diplomatic pressure on India to stop buying Russian energy.
Most of India’s oil imports are from West Asia (Iraq 23%, Saudi Arabia 18%, UAE 11%). The USA has also now become an important crude oil source for India (7.3%). Pointing out that Russia has been a marginal supplier of crude oil to India (less than 1% of our requirement, not among the top 10 sources), sources said that the jump in oil prices after the Ukraine conflict has now added to our challenges and the pressure for competitive sourcing has naturally increased. There is no government-to-government arrangement for the import from Russia, they added.
India, the world’s third biggest oil importer and consumer, covers 85% of crude oil requirement (5 million barrels a day) from imports. The Indian Oil Corporation (IOC), the nation’s top oil firm, has already bought as much as three million barrels of crude oil that Russia had offered at a steep discount to prevailing international rates and other oil corporations in the country are also in negotiations with Russia for importing its crude.
India has not supported the Russian invasion of Ukraine. New Delhi has consistently asked all stakeholders to resolve differences through dialogue. It has, however, abstained in all United Nations resolutions against Russia. “But Russia offering us oil and other commodities at a heavy discount. We will be happy to take that,” government officials said.
Following the sanctions, companies with high exposure to the U.S. market cancelled orders for Russian crude and gas. This, however, freed up a large amount of Russian energy, which Moscow is making available to potential buyers at a reduced price. The source said the push to acquire Russian oil and gas was part of “competitive sourcing.” As the US and other western nations slapped sanctions on Moscow, Russia has begun offering oil and other commodities at discounted prices to India and other large importers. External Affairs Ministry Spokesperson Arindam Bagchi on Thursday did not rule out buying discounted crude oil from Russia saying India looks at all options at all points of time as a major importer of oil. “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 the best options,” official source said.
Imports from the US are also expected to increase substantially in the current year, probably by around 11%. Almost 75% of Russia’s total natural gas exports are to European states that are members of the Organisation for Economic Cooperation and Development (OECD), such as Germany, Italy and France. European countries such as the Netherlands, Poland, Finland, Lithuania and Romania are also large buyers of Russian crude.
About importing from Iran, official sources said, “Rupee-Rial trade mechanism can help companies from both the countries to deal with each other directly and avoid third party intermediation costs.” India and Iran had devised a barter-like mechanism to settle trade where Indian refiners were paying for Iranian oil in rupees to a local bank and the funds were used by Tehran to pay for imports from India. Due to sanctions, the India-Iran trade declined sharply from $17 billion in the fiscal year to March 2019 to less than $2 billion in April-January, the first 10 months of this fiscal year. “If both countries launch rupee-rial trade mechanisms, the bilateral trade could grow to $30 billion,” sources estimated.
The jump in global fuel prices since the beginning of the conflict in Ukraine has added to India’s challenges, and the pressure for competitive sourcing has naturally increased. 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.