InvestorQ : Is it true that India substantially increased its intake of crude oil from Russia in recent months?
manisha Kolvenkar made post

Is it true that India substantially increased its intake of crude oil from Russia in recent months?

Crowny Pinto answered.
3 weeks ago

There are some interesting developments on the oil front. In May 2022, Russia overtook Saudi Arabia to become India's second-largest oil supplier. Iraq is still the largest exporter of oil to India. The growth is quite sharp. One year back, Russian oil was just about 1% of the Indian monthly oil import basket. In May 2022, the share of Russia has escalated to a whopping 16% of India’s oil import basket. How did this trend come about?

In May, Russia exported about 25 million barrels of oil to India? This trend got accentuated once the Russia Ukraine war started about 100 days back. Firstly, the US and UK sanctioned Russian oil, and now even EU has decided to wind up purchases of Russian oil by 2027. That would be a big blow since the EU accounted for bulk of the oil exports from Russia. But Russia obviously had a Plan-B in place to handle this eventuality.

With the EU likely to go and Japan already gone, Russia was in a spot. In the interim, India and China have heavily purchased Russian crude and made up the shortfall. Russia has offered hefty discounts of $25/bbl to $35/bbl to make Russian oil attractive. Not surprisingly, two of the world’s major importers, China and India went overboard buying Russian oil at discounted rates. China overtook Germany as the largest oil buying country from Russia. For India, Russia has become the second largest supplier.

For India, the deal made a lot of sense. It was a way of showing friendship and comradeship with Russia in these tough times. It allowed India to cement its ties with Russia. On the other hand, amidst rising crude prices and consumer inflation near 8%, discounted Russian oil was a blessing in disguise. India just made the best of it. In the world of diplomacy, it is self-interest that works best. After all, when Joe Biden goes out of the way to hobnob with Saudi Arabia, you know what diplomacy is all about.

The numbers are really telling. Indian oil imports from Russia surged from 277,000 barrels in April 2022 to 819,000 barrels in May 2022. India is the third largest importer of oil in the world after the US and China and imports 85% of daily needs. Obviously, discounts are a huge relief. This is costing nearly €200 million per day but despite the discounts offered, Russia’s export price realization is 60% higher compared to last year. Nobody is complaining.