Ukraine war: rising prices cap India’s thirst for Russian oil

Indian refiners bought 1.45 million barrels per day of Russian oil last month, their lowest amount since last January and down nearly 16 per cent from November, according to global energy trade intelligence platform Kpler.

New Delhi’s reduced imports will be welcomed by some European policymakers, who have raised concerns over how Indian refiners have processed Russian crude into fuel for the European market, effectively bypassing the EU’s sanctions.

New Delhi and Moscow have ties dating back to the Cold War, and Russia remains by far the biggest arms supplier to the world’s most populous country.

But instead of following in the West’s footsteps, it has doubled down on its historical partnership with Russia to secure cheap energy, to help it boost growth without running up its fiscal deficit.

Why India is starting to gag on its Russian oil binge

India is the world’s third-largest importer and consumer of oil, and imports nearly 80 per cent of its needs.

In the 10 months after Russia invaded Ukraine, India saved US$3.6 billion by importing heavily discounted crude from Russia, according to data presented by a ruling party lawmaker in parliament.

The country’s imports of Russian crude peaked in June 2023 at nearly two million barrels per day, but have steadily shrunk since.

Government officials say the change is purely pragmatic and price-driven, rather than political.

“If they don’t offer us a discount, why would we buy from them,” Indian oil minister Hardeep Singh Puri told reporters last week.

“India’s leadership has only one requirement: that the Indian consumer gets the energy at the most economical price, without disruption,” he added.

Indian refineries paid an average US$85.90 a barrel for Russian crude in November, according to a Bloomberg analysis of government data, just above the $85.70 offered by Iraq, and over US$25 higher than the G7’s price cap.

Moscow is itself looking to shore up its oil revenues.

In May, Russian Finance Minister Anton Siluanov blamed “all these discounts” for a 50 per cent fall in its energy revenues.

Yale professor Jeffrey Sonnenfeld, who has advised the US Treasury on the price caps, said there had been some “reduction in the efficacy of the price cap”, but said it was still driving up Moscow’s shipping and insurance costs.

Indian officials admit there have been logistical challenges.

Why China and India want more Russian oil amid rising Western pressure

New Delhi and other customers of Russian oil prefer to avoid paying for it in US dollars as doing so could open them to secondary sanctions.

But the deal ultimately did not go through because the Russian oil supplier was unable to open a UAE bank account to accept the currency, he said.

The shipment changed destination on the high seas and now appears to be en route to a Chinese refiner, according to an assessment by energy trade platform Vortexa.

Asia gets most Russian dark fuels after EU embargo – China, India main importers

China remains Moscow’s biggest oil customer and tracking data from Kpler shows that over the last two months, 10 tankers of Sokol cargoes that were headed for Indian destinations either changed course or idled abruptly.

But minister Puri insisted payment problems were not driving the import drop, saying: “It is a pure function of the price at which our refineries will buy.”