New reports have emerged that during the second quarter, India slashed its crude imports from the United States by one million metric tonnes while sharply ramping up imports of discounted Russian oil.
India’s energy mix now looks dramatically different from a year ago. Last year, Russian oil in India’s crude basket amounted to a paltry 2.2%, while the U.S. was 9.2%; right now, Russia accounts for nearly 12.9% of India’s crude imports, while the U.S. share has tumbled to just 5.4%.
India has never been a big buyer of Russian crude despite having to import 80% of its needs. In a typical year, India imports just 2-5% of its crude from Russia, roughly the same proportion as the United States did before it announced a 100% ban on Russian energy commodities. Indeed, India imported only 12 million barrels of Russian crude in 2021, with the majority of its oil sourced from Iraq, Saudi Arabia, the United Arab Emirates and Nigeria.
But back in May, reports emerged of a “significant uptick” in Russian oil deliveries bound for India.
According to a Bloomberg report, India spent a good $5.1 billion on Russian oil, gas and coal in the first three months after the invasion, more than five times the value of a year ago. However, China remains the biggest buyer of Russian energy commodities, spending $18.9 billion in the three months to the end of May, almost double the amount a year earlier.
And, it’s all about the money.
According to the International Energy Agency (IEA), Urals crude from Russia have been offered at record discounts. Ellen Wald, president of Transversal Consulting, has told CNBC that a couple of commodity trading firms–such as Glencore and Vitol–were offering discounts of $30 and $25 per barrel, respectively, for the Urals blend. Urals is the main blend exported by Russia. Experts say simple economics are the biggest reason why White House pressure to curb purchases of crude oil from Russia have fallen on deaf ears in Delhi.
Responding to a question on India-Russia ties, U.S. state department spokesperson Ned Price has acknowledged that India shares a historical relationship with Russia, and it would be a Herculean task to change that.
Source: Business Standard, Bloomberg, OilPrice