India reduces Russian oil import over pricing
The development has coincided with reports of more than a dozen Russian tankers being diverted from India since December.
Indian refiners have significantly cut Russian crude imports and plan to further decrease shipments from the sanctions-hit country after Moscow steeply reduced discounts from about $10 a barrel to around $2 in recent months, at least four people directly aware of the development said.
Indian oil companies have decided to cut crude imports from Russia because of only one reason, price, they said, requesting anonymity.
“Additionally, high insurance and transportation costs due to current geopolitical situation make Russian crude almost unviable. And our traditional sources such as Saudi Arabia and the UAE are offering very competitive rates,” one of them, a senior government official, said.
The development has coincided with reports of more than a dozen Russian tankers being diverted from India since December.
Indian refiners started buying Russian crude only when it offered heavy discounts. That saw inflow of oil from Russia jumping to almost one-third of country’s requirements from about 0.2% in early 2022, a second official said. “Indian refiners are free to take their commercial decisions. There are no other issues – such as payment problem or pressure from developed countries – involved in purchasing less oil from Russia,” he added.
The sanctions against Russia followed its invasion of Ukraine in early 2022, and there was criticism of India’s choice to import crude from the country, but New Delhi has consistently maintained that its primary focus is energy security, and ensuring stable fuel prices.
A third person, a senior executive of an oil firm, said Indian companies are completely free to choose their suppliers. “If Russia offers deep discounts again, we may again consider buying crude from the country,” he added.
If there is no “good” discount, why will any refiner purchase crude from Russia with a very turbulent and lengthy shipping route, a fourth person working in a state-run refiner said adding that the Russian crude is also difficult to process.
On January 3, oil minister Hardeep Singh Puri told reporters that Indian refiners started buying Russian crude only after it started offering discounts. “I’ve said not once, but 10 times that India has diversified its source of imports… India will buy from whomever… India’s leadership has only one requirement that Indian consumer must get energy at the most economical price without disruption,” he said.
People familiar with developments said Western sanctions and the oil price cap imposed by the G7 had begun impacting Russian oil supplies in recent weeks. After Indian payments in rupees accumulated in Indian banks – an issue that was highlighted by Russian foreign minister Sergey Lavrov last year – the two sides had explored payments in UAE dirhams.
Russia’s state-run energy giant Rosneft was not able to open a bank account in the UAE, curtailing its ability to accept payment in dirhams. The Indian side has also been reluctant to pay in Chinese yuan, another currency acceptable to the Russian side, because of ongoing tensions with Beijing because of the standoff on the Line of Actual Control (LAC), the people said.
There have been several reports about Russian oil tankers heading away from India in recent weeks. Bloomberg reported five tankers carrying Sokol oil idled in waters close to India and Sri Lanka for almost a month before heading toward the Malacca Strait.
Sanctions imposed by the US on vessels of Sovcomflot, Russia’s largest shipping company, for not complying with the G7 price cap of $60 a barrel, have also impacted tankers such as NS Century, which idled in waters off the Indian coast at the end of 2023.
India is the world’s third largest crude oil consumer after the US and China and imports over 87% of crude it processes. In 2022, the US consumed 822.7 million tonnes (MT) of crude (or 19.1 MT a day), China 659.2 MT or 14.3 million tonnes per day, and India 236.9 MT of crude oil, which was 5.2 million tonnes a day. India is also the fourth largest refiner in the world after the US, China and Russia.
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