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The surge in India’s imports of crude oil from Russia has deepened its trade deficit with the latter and has rendered rupee trade pointless, Bloomberg has reported, citing unnamed sources.
According to these sources, despite much talk about switching some bilateral trade to rupees, no payments have been initiated so far because Russian banks do not want to accumulate rupees.
At the same time, the report notes that Moscow and New Delhi have been discussing an increase in Indian exports to Russia, for instance in electronics, so the idea of bilateral trade in rupees begins to make sense again.
Between April and November 2022 India’s imports of Russian goods and commodities exceeded exports to Russia 16 times, Bloomberg also noted.
A lot of these exports were crude oil as Russia turned from a minor oil supplier to one of the world’s biggest importers into one of its top suppliers. The discount caused by sanctions and EU embargos on Russian oil and fuels all combined to stimulate these higher exports to the subcontinent.
Earlier this month, Russian Deputy Prime Minister Alexander Novak said that in 2023, Russia will sell most of its oil to countries it considers friendly, as opposed to the EU and North America. China and India are the biggest among them.
Last month, India was the biggest buyer of Russian crude, with 70 percent of Urals volumes loaded in January going to that country. China is the second-biggest buyer of the flagship Russian blend.
Last year, Russia became India’s third-largest oil supplier, after Iraq and Saudi Arabia. In December last year, imports of Russian crude hit an all-time high of 1.25 million barrels daily out of the total 4.9 million bpd in crude imports.
"India's oil imports from Russia would continue to rise this year as well mainly because of discounts if there are no further stringent actions by the Western countries targetting Russian oil," a source from an Indian refining company told Reuters in January.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.