Despite the fact of sanctions imposed on Russia by the United States and several European countries, India is importing petroleum products from Russia by adopting alternative payment method. Because of this, India is successfully fighting inflation and saving country’s foreign currency from buying oil at an exorbitantly higher price.
According to Forbes magazine, India’s imports from Russia have more than tripled since the beginning of Ukraine war earlier this year largely driven by the purchase of cheap oil, a development that comes despite Western criticism of the move as the world’s largest democracy attempts to balance its energy needs, historic ties with Russia along with its growing security partnership with the West.
The total value of India’s imports from Russia has risen to US$8.6 billion since February 2022, a sharp uptick from just US$2.5 billion during the same period last year, the Times of India reported, citing data from the Indian commerce ministry.
Between April and May this year—as the West moved to ban Russian oil—India imported US$3.2 billion worth of crude oil from Russia compared to just US$210 million in March and zero in February.
Besides oil, India imported 774,000 metric tons of fertilizers from Russia in the quarter ending in June 2022, more than 20 percent of its total fertilizer import during this period, Chemicals and Fertilizers Minister Mansukh Mandaviya told the Indian parliament.
India’s decision to buy from Russia has been driven by Moscow’s decision to steeply undercut international prices for commodities it is banned from selling to the west.
As India’s inflation remained above 7 percent, deep discounts from Russia have offered the world’s third largest importer of oil some relief.
Despite some western criticism India has vehemently defended its decision to continue buying Russian oil, pointing to Europe’s dependence on Russian gas imports. Speaking at the World Economic Forum in May, Indian Trade Minister Piyush Goyal said: “In the current situation, when inflation is at an all-time high, causing stress to people all over the world, the European Union and other countries in Europe continue to buy far larger quantities than India ever thought of buying or will ever buy.” Goyal also pointed out that India’s purchase in no way violates any sanctions that have been put in place by the West.
While India has pointed to the European Union’s consumption of Russian energy as a counterargument to criticism of its purchases, the EU has taken steps to severely curtail this. In May the EU issued its sixth sanctions package against Russia which pledged to cut “almost 90 percent” of all Russian oil imports by year-end, starting with an immediate ban on two-thirds of such imports. Earlier this week, prompted by Russia’s unilateral slashing of supply, the EU reached a deal to cut its natural gas usage by 15 percent.
As it faces a swathe of sanctions targeting trade and shipping Russia is also attempting to jumpstart the ambitious International North-South Transport Corridor (INSTC) project. The INSTC is a nearly 4,500-mile trade network of roads, railways and shipping routes that connects India and Russia via Iran.
Meanwhile, international media reports suggest that India is not only buying petroleum products from Russia at a cheaper price, it also is selling it to several Western nations, including the US. This was disclosed when the United States expressed its concern to India stating that it was being used to export fuel made from Russian crude, through high-seas transfer to hide its origin, to New York in violation of US sanctions.
According to media reports, the US Treasury Department told India that an Indian ship picked up oil from a Russian tanker on the high seas and brought it to a post in Gujarat on the west coast, where it was refined and shipped on.
India, the world’s number 3 oil importer and consumer rarely bought Russian oil in the past. But since the war started, Indian refiners have been snapping up discounted Russian oil, shunned by many Western countries and companies.
Multiple channels offering Russian crude oil at cheaper price
India is set to get more channels to buy cheap Russian oil, with a new wave of smaller, international traders muscling into its vast market by offering barrels shunned by rivals after the invasion of Ukraine.
State-run refiners such as Indian Oil Corp. are warming to the idea of buying from the lesser-known traders. Refinery officials said they’ve found it easier to work with them, rather than directly with Russian producers, as there’s less bureaucracy that slows negotiations with firms such as Rosneft PJSC.
Companies include Wellbred and Montfort have been marketing Russian oil to Indian buyers, joining the likes of Coral Energy and Everest Energy as more traders emerge to fill the gap left by larger merchants such as Vitol Group, said the officials, who declined to be named. According to their websites, the companies have offices in Switzerland, Dubai and Singapore.
Trading houses often serve the function of middlemen by bridging differences between sellers and buyers. In theory, some companies can continue to work with Russian entities that’ve been sanctioned under certain jurisdictions, help with financing and logistics, and even offer different payment terms to assist in the movement of funds. Sri Lanka received Russian crude onboard a vessel chartered by Coral Energy in May and has since bought more from the trader.
“Indian refiners are willing to take the risk of dealing with these new, little-known traders because the discounts must be too good to pass up,” said Vandana Hari, founder of Vanda Insights. “We know the Indian refiners want the Russian cargoes on a delivered basis. So as long as the new traders are fulfilling that need, it works”, she added.
The new crop of merchants was recently offering supplies of Russian Urals crude at discounts of about US$8 a barrel, according to officials. They are also beefing up staffing, they said. Wellbred’s employees include former individuals from larger companies such as Glencore Plc and Gunvor Group.
Some traders are offering payment options in alternative currencies such as United Arab Emirates dirhams, according to officials. Separately, India’s central bank has announced a plan to settle international trade in the local currency.
As the shift plays out, Indian Oil, the nation’s biggest processor, has been importing Russian oil at a record-breaking pace and overtaking its private peers, according to analytics firm Kpler. Inflows have averaged 450,000 barrels a day in July — up 44 percent from last month — while India’s overall purchases of Russian barrels rose 3 percent to about 1 million barrels a day, Kpler data show.
Commenting on Bangladesh’s possibility of buying Russian crude oil, Salah Uddin Shoaib Choudhury, editor of this newspaper, who has served as the Chief Correspondent of the Russian state-owned news agency TASS for many years said, “Bangladesh needs to adopt smart strategies if we are sincerely looking for buying Russian oil. To my knowledge, relations between Dhaka and Moscow has always been extremely warm and cordial, while the former Soviet Union had extended all-out support to our war of independence. Meaning, Russia is our time-tested friend and ally. Instead of openly making announcements of statements about buying crude oil from Russia at a cheaper price, Bangladesh authorities need to silently contact their Russian counterparts. At the same time, Bangladesh can also use third-channels and may contact companies such as Wellbred, Montfort etcetera for buying Russian crude oil. It is not a complicated or difficult task. Only our policymakers need to act on the correct direction”.
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