Virendra Pandit
New Delhi: India, which depends on imported oil for over 80 percent of its energy requirements—only one percent of it comes from Russia—plans to buy about six million barrels of Russian crude at a 25 percent discount in the next couple of months to replenish its stock as Russia’s ongoing war against Ukraine may disrupt supply chains.
India may import 15 million barrels of cheap Russian oil beginning this year, the media reported.
Because of the Russian invasion of Ukraine on February 24, the West and its allies, like Australia and Japan, have imposed crippling financial sanctions against Moscow. The US has also banned Russian oil imports. But, unlike the US sanctions against Iran for its controversial nuclear program, its allies have also kept energy trade out of these restrictions as Europe itself depends on Russian energy for 40 percent of its needs. And energy export is the main artery of the Russian economy through foreign exchange.
Earlier, Iran was also cut off from the international money and security transfer system, SWIFT, and companies or entities investing in or buying oil from Iran were sanctioned. But they have only cut Russia off from SWIFT.
In Russia’s case, as of now, any country or company can buy Russian oil and other energy commodities and use the international payment systems to settle the trade, the media reported on Thursday.
That is why India can buy Russian oil through its public sector refiners and oil marketing companies (OMCs) whose disinvestment process is in progress or under consideration.
Last week, the Indian Oil Corporation Ltd (IOCL) bought three million barrels of Russian oil. Now, the Hindustan Petroleum Corporation Ltd (HPCL) has also bought two million barrels as Indian refiners stepped up efforts to secure Russian oil available for deep discounts. Both the OMCs bought Russian Urals crude through European trader Vitol, the reports said.
Besides, Mangalore Refinery and Petrochemicals Ltd (MRPL) has also floated a tender seeking to buy one million barrels of similar crude oil.
Western sanctions on Russia prompted many companies and countries to shun its oil. This has led to Russian crude being available in the market at deep discounts. Moscow has also offered to pay the cost of insurance and shipping of crude.
The IOCL bought three million barrels of Urals through Vitol for May delivery at a discount of USD 20-25 a barrel to dated Brent, which hovered around USD 100 per barrel. This week, the HPCL also purchased two million barrels of Urals crude for loading in May, the media reported.
India has tied up supplies from Russia to the US in a bid to diversify its oil import basket, cutting reliance on the Middle East to meet its energy needs.
With imports making up about 85 percent of its oil needs, the recent spike in international oil prices has hurt India badly. It is now looking to cut spiraling energy bills through purchases from anywhere it can get at cheaper rates.
Many countries, including European nations, remain heavily dependent on fuel from Russia, the world’s second-largest crude oil exporter after Saudi Arabia.
However, only one percent (nearly 45,000 barrels a day in 2021) of India’s total crude oil imports come from Russia.
Its decision to take up discounted Russian oil will violate none of the US sanctions on Moscow, the White House said.
“Our message to any country continues to be that abide by the sanctions that we have put in place and recommended,” White House Press Secretary Jen Psaki told reporters at her daily news conference on Tuesday.
Asked about the possibility that India could take up the Russian offer of discounted crude oil, Psaki said, “I don’t believe this would violate that (sanctions).”