Russia has become the single biggest crude supplier to India over the past year as the world's third-largest oil importer snaps up discounted Russian oil banned in the West.
Russia has been redirecting most of its crude oil exports to China and India since the EU and the G7 announced plans to embargo seaborne oil imports from Russia and set a price cap on the crude if it is to be shipped to third countries using Western tankers and insurers.
China's reopening is set to lead to a jump in oil demand in the world's top crude oil importer, where Russia has always competed with its OPEC+ ally Saudi Arabia. But Moscow isn't giving up the Indian market, either, where it has turned from a negligible supplier a year ago to the single biggest oil supplier now.
China and India aren't abiding by the G7 price cap—they seek opportunistic purchases of cheap crude. The West believes that the price cap is benefiting the two large Asian oil importers with bargaining power to negotiate steep discounts from Russia, with traders covering shipping costs. The U.S. and the EU consider the increased leverage of China and India in driving a hard bargain for Russian oil as a success of the price cap policy.
Despite the expected growth in Chinese demand, Russia continues to ship growing volumes of crude to India and sets new records every month.
India imported a record 1.4 million barrels per day (bpd) of crude from Russia in January, up 9.2% compared to December, per data from trade sources reported by Reuters. Russia remained the top supplier of the world's third-largest importer, followed by Iraq and Saudi Arabia, and Russian imports accounted for 27% of all 5 million bpd in Indian crude oil imports.
In February, India's imports from Russia continued to rise—to an estimated 1.85 million bpd, close to the potential maximum of 2 million bpd, according to Kpler data cited by Bloomberg.
Russia is intent on keeping the Indian market because it is more lucrative, gives sellers more control, and the shipping times from Russia's Western ports are shorter than to China, Viktor Katona, lead crude analyst at Kpler, told Bloomberg.
Before the Russian invasion of Ukraine, India was a small marginal buyer of Russian crude oil. After Western buyers started shunning crude from Russia, India became a top destination for Russian oil exports alongside China.
Even after the G7 price cap took effect in early December, India continued to buy large volumes of discounted Russian crude and started importing some of Russia's Arctic crude oil varieties for the first time, taking advantage of cheap Russian cargoes to meet robust demand.
India's fuel consumption is expected to rise by 4.7% in the next fiscal year between April 2023 and March 2024, government estimates showed last month.
India will buy the oil it consumes from "wherever we have to" if the economics are beneficial for the country, Indian Oil Minister Hardeep Singh Puri told CNBC last month.
"Today we feel confident that we'll be able to use our market to source from wherever we have to, from wherever we get beneficial terms," the minister said.
The U.S. has said it would not sanction India for buying Russian crude. In fact, India's imports of cheap Russian oil fit the West's goal to punish Putin by reducing his oil revenues – a key budget revenue stream – and at the same time keep Russian oil flowing to prevent price spikes.
"Our experts assess that India right now is enjoying the discount of about USD 15 a barrel in the price that it is paying for its imports of Russian crude," U.S. Assistant Secretary of State for Energy Resources, Geoffrey Pyatt, told PTI in an interview while on a visit to India last month.
"So by acting in its own interest, by driving a hard bargain to get the lowest price possible, India is furthering the policy of our G7 coalition, our G7 plus partners in seeking to reduce Russian revenues."
Also in February, Philipp Ackermann, Germany's Ambassador to India, told local news outlet ANI, "I have made it clear time and again that India buying oil from Russia is none of our business basically that's something that the Indian government decides and if you get it at a very very low price, you know I cannot blame India for buying it."
By Tsvetana Paraskova for Oilprice.com
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