With Russia offering heavy discounts on crude oil to the prevailing international rates after being slapped by sanctions by the US and other western nations, India – a major importer of oil takes no time to take the advantage of the cheaper rates.
India’s top oil firm, Indian Oil Corporation (IOC) has bought as much as 3 million barrels of crude oil that Russia had offered at a steep discount, sources said.
This is the first purchase since Russia’s February 24 invasion of Ukraine that brought international pressure for isolating the Putin administration and was bought for May delivery at a discount of USD 20-25 a barrel to dated Brent.
Made via a trader, IOC purchased the crude oil on modified terms that require the seller to deliver it to the Indian coast to avoid any complications that sanctions may lead to in arranging shipping and insurance.
The sanctions slapped by the US on Russia are unlike the ones made on Iran over its controversial nuclear program, oil and energy trade with Russia has not been banned. This means international payment systems are available to settle any purchase made from Russia, they said.
India meets 85% of its oil need through imports. The nation has been looking to cut spiralling energy bills through purchases from anywhere it can get at cheaper rates.
Oil Minister Hardeep Singh Puri on Monday told Rajya Sabha that the country will evaluate the Russian offer to sell crude oil at discounted prices after considering aspects such as insurance and freight required to move the fuel from the non-traditional supplier.
“Let me again reiterate that in a situation like the one characterized by the pandemic in the last two years and the last few weeks by a war or a military action taking place between Russia and Ukraine, the government will explore all options which are available,” he had said.
The minister said he has had discussions with the Russian government officials.
“Discussions are currently underway. There are several issues which are required to be gone into like how much oil is available either in Russia or in new markets or with new suppliers which may be coming in the market. Also, there are issues relating to insurance, freight, and a host of other issues including the payment arrangements,” he had stated.
Several nations including the European nations are heavily dependent on fuel from Russia, the world’s second-largest crude oil exporter behind Saudi Arabia. India imports 1.3 percent of all its oil needs from Russia.
India’s decision to take up Russia’s offer of discounted crude oil does not violate any of the US sanctions on Moscow given India’s neutral stance on the Russia-Ukraine conflict.
Moscow’s offer of oil and other commodities at discounted prices will provide relief on the fiscal front.
“India’s attempt to diversify its import sources will tend to reduce the financial burden on the government thereby reducing the risk of high import bills. Moreover, cheaper crude may bring down the current cost of production and help cool off inflationary pressures,” said Gargi Rao, Economic Research Analyst at GlobalData.