August 16, 2024
New Delhi, India
Crude Oil Import
India’s crude oil imports from Russia have skyrocketed, with July 2024 witnessing a substantial $2.8 billion worth of purchases. This represents nearly 40% of India’s total oil imports, a sharp contrast to pre-war levels when Russian oil comprised less than 1% of the country’s imports. India, the world’s third-largest oil consumer and importer, has increasingly turned to Russian crude, capitalizing on the discounts offered following sanctions imposed on Russia by European nations in response to the Ukraine conflict.
India’s Shift in Oil Import Patterns:
- Pre-War vs. Current Imports: Before the onset of the Russia-Ukraine war, Russian oil imports constituted less than 1% of India’s total crude oil imports. However, recent data reveals a significant shift, with Russian imports now making up almost 40% of India’s total oil purchases.
- Discounted Russian Crude: Russia has become India’s largest supplier of crude oil, largely due to the discounted rates offered after European countries began avoiding Russian oil. The discount on Russian Urals-grade crude oil widened by 9% month-on-month in July to USD 16.76 per barrel compared to Brent crude.
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Global Context and Comparisons:
- China vs. India: China remains the largest importer of Russian oil, with 47% of Russia’s crude exports directed there, followed by India at 37%, according to the Centre for Research on Energy and Clean Air (CREA). The European Union (EU) and Turkey account for 7% and 6% of Russian crude exports, respectively.
- Coal Imports: Beyond oil, both China and India have also significantly increased their coal purchases from Russia. China accounted for 45% of Russia’s coal exports between December 2022 and July 2024, while India accounted for 18%.
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India’s Oil Import Expenditure:
- July Expenditure: In July, India spent USD 11.4 billion to import 19.4 million tonnes of crude oil. Of this, almost 80% of the imports, valued at approximately USD 2.86 billion, were sourced from Russia.
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Impact of the Price Cap Policy:
- Price Cap Policy: In late 2022, the US and Western nations introduced a price cap policy aimed at limiting Russia’s revenue from crude oil sales. Russian oil cargoes could only access Western services like insurance and shipping if sold below USD 60 per barrel.
- Shadow Fleet Emergence: To bypass the price cap policy, a fleet of “shadow” tankers, consisting of second-hand and older vessels with unclear ownership, emerged. In July, 81% of the total value of Russian seaborne crude oil was transported by these shadow tankers, while tankers owned or insured in countries implementing the price cap accounted for only 19%.
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India’s growing dependence on Russian crude oil reflects the geopolitical and economic shifts in global energy markets following the Russia-Ukraine conflict. As Russia offers discounted oil, India has capitalized on the opportunity, significantly increasing its imports. However, the emergence of a shadow fleet and the ongoing price cap policy will continue to influence the dynamics of global oil trade and India’s energy strategy.
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