It may not be news to many that the Federation of Indian Export Organisations (FIEO) has been advocating the establishment of an Indian shipping line of international standards, since a long time now. The basis of their arguments lies in the excessive and expensive dependence of Indian traders on foreign shipping lines. They claim that India repatriated over USD 80 billion in transport services in calendar year 2021
In this direction, the Russian government has offered India to provide assistance in building large capacity ships – something that would help India reduce its cling on exorbitant shipping lines. The offer came soon after India made a stance to not follow the G7’s price cap on Russian oil, which was imposed earlier this month.
“Concurrent restrictions on G7 insurance and financing, a delayed rollout of the price cap, and Russia’s aversion to selling into western policy constraints will combine to create an initial shortage of ships and buyers required to re-route roughly half of the 2 million barrels per day,” S&P Global’s chief geopolitical risk advisor said in a note.
It should be noted that earlier this year, with India’s fuel demand reaching record high, oil exports from Russia did not miss much of a beat. The Russian oil barrels travelling via sea stayed stable in November at just over 3 million barrels per day. With these numbers, India somewhat helped Russia offset the threat of loss on the European end. Europe’s imports from Russia sank to all-time lows ahead of the EU’s capping of Russian oil prices. On the other hand, according to the Russian Foreign Ministry, Russian oil imports to India rose to 16.35 million tonnes in the first eight months of 2022.
“While Russian crude flows to the EU slumped 308,000 b/d to average a record low of 464,000 b/d in the month, Indian refiners stepped up their buying of Russian oil by 272,000 b/d to a record 1.17 million b/d,” S&P said.
Alexander Novak, Deputy Prime Minister of Russia, offered India cooperation on leasing and building large-capacity ships, which will help India to reduce its reliance on European insurance services and the charter of tankers. Last year New Delhi and Moscow decided to focus on the area of civilian shipbuilding, which will facilitate enhancement of investments in shipbuilding and repair, scientific research, development of intelligent transport & navigation systems, and international transport corridors. The civilian ships are also intended for oil trade. Mazagaon Dock Ltd and Zvezda Shipyard of Russia have signed an agreement for commercial shipping.
Bilateral trade between India and Russia has witnessed a record increase on the charts. Both the nations are furthering their mutual interest in the form of trade of energy resources like oil, petroleum products, liquefied natural gas, coal and fertiliser. Between April and September, India’s exports to Russia stood at USD 1.29 billion, compared with USD 3.25 billion during the last financial year. Imports from Russia, however, have grown fivefold in the first five months of the fiscal to USD 17.23 billion.
The executive body of the European Union has asked its 27 member-countries to cap the price of Russian oil at USD 60 a barrel as part of the West’s attempt to squeeze Moscow’s oil revenues and limit its ability to wage war in Ukraine while keeping global prices and supplies steady. From 5 December, western shipping and insurance companies are prohibited from handling Russian oil sold above the price cap.
“The introduction of a price cap on Russian oil is an anti-market measure. It disrupts supply chains and could significantly complicate the situation in global energy markets. Such non-market mechanisms disrupt the international trading system as a whole and set a dangerous precedent in the energy market.”Alexander Novak, Russia’s Deputy Prime Minister
India’s Minister of External Affairs S Jaishankar, and Minister for Petroleum and Natural Gas Hardeep Singh Puri, have both maintained a continuous diplomatic standpoint on India’s oil imports from Russia. They have said on multiple occasions that oil will be purchased from the source with the best deal and it’s the oil companies who make the purchases instead of the government.
Puri told CNN last month that “there is no moral conflict. if somebody wants to take an ideological position… We don’t buy from X or Y, we buy whatever is available. I don’t do the buying, it’s the oil companies who do the buying.”
India has also been evidently vocal about its neutrality on the Russia-Ukraine war.