Since The Russian Invasion Of Ukraine, India Is Purchasing Cheap Russian Oil
There has been a “substantial increase” in delivery of Russian oil to India since the invasion of Ukraine by Moscow, according to reports quoting industry observers, which added that there seems to be an apparent preparedness of New Delhi to purchase more cheap oil from Russia.
It is also being widely expected that China, which is already the largest importer of Russian oil, will purchase more oil at huge discounts from Moscow, reports also quoted industry experts as saying.
That could increase the price of crude in the near future.
Since last year, rising fuel prices have been tormenting both India and China, which are the two of the largest importers of oil globally.
There has been a wide fluctuation in global crude oil prices in recent weeks. However, despite this, the price of crude internationally is 80% higher than their prices a year ago.
“We believe that China, and to a lesser extent, India will step up to buy heavily discounted Russian crude,” according to Matt Smith, the lead oil analyst at Kpler.
This would be in stark contrast to the anti-Russian rhetoric used by major international countries and corporations. As a result of Russia’s aggressive and unconstitutional assault on Ukraine, the US has slapped energy restrictions on the country, while the UK has promised to do likewise before the end of the year. In addition, the European Union is discussing whether or not to follow suit.
Economists, on the other hand, expect that the sanctions will create a market vacuum, with Russia holding excess crude that it will be unable to sell.
The Indian government’s motivations are more economic than political. India will always look for a bargain when it came to oil imports.
“Urals crude from Russia is being offered at record discounts, but uptake is limited so far, with Asian oil importers, for the most part, sticking to traditional suppliers in the Middle East, Latin America, and Africa,” the International Energy Agency said on March 17. Urals crude is the main oil blend that Russia exports.
“As of mid-March, we see the potential for 3 million barrels a day of Russian oil supply to be shut in starting from April, but that could increase if restrictions or public condemnation escalate,” the IEA said.
Fears of an oil scarcity have roiled markets since Russia’s invasion of Ukraine on February 24, as Russia supplies a substantial share of the world’s oil and gas.
“Russia oil is still finding a home. Indian refiners have issued several tenders for Urals crude as the discount to Brent continues to rise,” according to ANZ Research.
Russia exports almost 5 million barrels of crude oil per day, according to the International Energy Agency. It is the world’s third-largest oil producer, after the United States and Saudi Arabia.
According to analysts and media reports, India may begin purchasing even more cheap oil from Russia at a 20 percent discount. Based on current fuel prices, this would save more than $20 a barrel.
India buys crude from Russia at a nominal share of between 2% and 5% every year, according to Samir N. Kapadia, head of trade at government relations consulting firm Vogel Group.
He stated that New Delhi has traditionally acquired its petroleum from Iraq, Saudi Arabia, the United Arab Emirates, and Nigeria, but that all of them are now exacting higher costs.
“Today, the Government of India’s motivations is economic, not political. India will always look for a deal in its oil import strategy. It’s hard not to take a 20% discount on crude when you import 80-85% of your oil, particularly on the heels of the pandemic and global growth slowdown,” Kapadia was quoted as saying.
In addition to the benefits of discounts, India would consider its friendship with Russia in removing crude from Russia’s hands.
“India is the third-biggest oil importer in the world and right now, they are weighing their options to work with an old friend,” said Kapadia.
India, like China, has so far voted against a UN resolution condemning Russia’s invasion of Ukraine.
Both countries have a long and distinguished history. According to Kapadia, Russia has supported India in a variety of areas, including the provision of military and defense-related equipment, which accounts for up to 60% of India’s needs. In the late 1950s, when the former became “broken,” India turned to Russia for rupee-ruble currency swap arrangements to finance its imports.
Russia has also assisted India in crucial disputes with China and Pakistan, such as the Kashmir dispute.
“White House pressure to curb purchases of crude oil from Russia have fallen on deaf ears in Delhi,” said Kapadia. “The real question will be how the US and Europe respond to India should they extend an olive branch to Russia by providing them an outlet for their oil.”
On the other hand, a defiant tine has been adopted by India.
“Countries with self-sufficiency in oil or those who import from Russia cannot credibly propose limited trading,” a government official told Reuters two weeks ago.
“If Western countries were to pivot India’s focus to consider how supporting Russia might embolden China’s geopolitical influence in the region, things could shift,” Kapadia added.
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