Russia is making huge inroads into the world’s third-largest oil market and is set to become one of India’s biggest oil suppliers, replacing historical suppliers from Saudi Arabia and Iraq.
India’s crude oil imports from Russia soared 21% in June, making Moscow India’s second-largest oil supplier, according to figures provided by data and analytics firm Kpler to The Independent. To put that into perspective, until 2021 Russia was only India’s tenth largest oil supplier.
Shunned by many of its traditional European buyers after its invasion of Ukraine, Russia’s sale of cheap crude oil to India surged from zero in January and February to a record 950,000 barrels per day in June. , as Delhi took over.
For the first time, India’s purchases pitted Russia against Iraq, its main traditional supplier. In June, Iraq sold about 1 million barrels a day to India, marking a slight drop in imports from Baghdad since May.
Imports from Saudi Arabia fell from 697,000 barrels per day in May to 686,000 in June. Along with Kuwait, imports had fallen earlier this year from a high of 297,000 barrels per day in February to 100,000 in April. They rose slightly to 233,000 barrels per day in June.
Matt Smith, Kpler’s chief oil analyst, said the massive increase in imports of Russian crude over the past two months has meant that “flows have plummeted from major Middle Eastern suppliers – Iraq and Saudi Arabia – as well as elsewhere”.
He adds that imports are at a “historic level” as they are the highest since the company’s records began in 2013.
Due to post-pandemic rebounds, India’s overall demand for crude oil has increased by almost 13% this year, compared to 2021.
India is a major refining hub, importing crude and exporting clean products such as gasoline and diesel. Consequently, exports of clean products are also on the rise – by nearly 9% from 2021, making it a lucrative deal for Delhi.
“For India, whether to buy cheap Russian oil remains an exercise in political balancing with the West. Getting cheap oil from Russia looks like a lucrative deal for India in the short term,” said Thomas Murphy, senior analyst for South Asia security and political risk at Dragonfly. The Independent.
But he notes the deal could bring long-term political downsides, as he expects India to face “increasing criticism and diplomatic pressure from the United States and Europe. “for failing to impose sanctions or hold Russia accountable for human rights abuses in Ukraine even as the conflict has raged for more than four months.
This major shift in India’s oil market is expected to cause unease among the South Asian nation’s allies, who have economic and trade ties dating back centuries.
Harsh V Pant, professor of international relations at King’s College London, tells The Independent that the Middle East will have to think carefully about its long-term strategy if its biggest buyers, India and China, gradually cease to depend on them.
For many countries in the Middle East, the sale of oil is their main income. Nearly 65% of the world’s oil reserves are in the Middle East.
India’s bilateral trade with Gulf Cooperation Council (GCC) countries – including Saudi Arabia and the United Arab Emirates – topped $150bn (£126bn) during the fiscal year ending March 2022.
But India is making the most of discounted Russian oil, he says, because it created incentives to reach other buyers while the Middle East inflated rates dramatically during the energy crisis.
“I don’t think the Middle East will view it as a long-term strategic challenge, but it has temporary implications for the Middle East…if you have China and India, which are the two biggest oil importers in the Middle East, taking advantage of the Russian windfall, which may be temporary, but it’s there, and it’s unclear how long the war will last.
Whether Russia will be able to attract these Asian countries at deep discounts when Europe stops buying oil from it altogether by the end of the year will determine long-term strategies, he says. Because, he adds, simply offering deep discounts is not viable in the long term.
“The Middle East needs to determine whether to continue on this trajectory or whether there needs to be a recalibration of oil markets,” he said, adding that India is an important market for the Middle East and that for Delhi, reasonable prices are necessary. a priority.
New cracks are also appearing as escalating internal communal tensions have affected India’s ties with Islamic nations.
In June, more than 15 Islamic countries condemned derogatory statements made by the spokesman of the ruling right-wing Hindu nationalist Bharatiya Janata Party (BJP) about the Prophet Muhammad.
Several Muslim-majority countries, including Qatar, Kuwait and Iran, summoned their Indian ambassadors to protest the remarks, while Indian products were pulled from markets after Muslim clerics called for a boycott.
To control the fallout, the BJP suspended Nupur Sharma and Naveen Jindal, the officials who made the Islamophobic statements but did not issue an apology, saying only that the party “strongly denounces insults from any religious figure”.
Meanwhile, pressure on India to wean itself off Russian oil will continue to be felt as US President Joe Biden meets Saudi Crown Prince Mohammad bin Salman and leaders of oil-rich allies during his trip to Middle East next month.
Sticking to India’s neutral stance on the war in Ukraine despite pressure from the US and the West, Indian Prime Minister Narendra Modi has held talks with Russian President Vladimir Putin to discuss trade bilateral and the “State of International Energy” on July 1. This was their fourth phone call since the February 24 invasion.
India has increased its purchases from Russia at a time when the United Kingdom, the United States and the European Union have imposed heavy sanctions to cut funding for the Kremlin’s war chest. The United States banned Russian oil imports in March while the EU said it would phase out Russian oil purchases by December.
Deliveries to EU-27 countries have averaged around 1.2 million barrels a day in recent months – a figure that India is closing in on. EU imports are down about a third from pre-war times of more than 2.2 million barrels per day.
Indian Foreign Minister Subrahmanyam Jaishankar chastised analysts and world leaders when asked if India was seeking financial opportunism amid a war.
“If India finances Russian oil, it is financing the war… Tell me, then buying Russian gas does not finance the war? Is it only the Indian money and the Russian oil which arrives in India which finance the war and not the Russian gas which arrives in Europe? Let’s be a little impartial,” Mr Jaishankar said in June.