India doubles down on move to procure crude oil from Russia

India welcomes competitive offers from all energy producers, including Russia, amid geopolitical developments that are posing significant challenges to the country’s energy security, people familiar with the development said on Friday.

The jump in global fuel prices since the beginning of the conflict in Ukraine has added to India’s challenges, and the pressure for competitive sourcing has naturally increased, the people said on conditions of anonymity while explaining the government’s decision to opt for cheaper energy from sources such as Russia.

Russia has offered crude oil and other commodities at discounted rates to India after the US and its allies imposed sanctions on Moscow following President Vladimir Putin’s decision to invade Ukraine last month. European companies are currently avoiding purchases of Russian oil because of problems associated with the wide-ranging sanctions.

Russian oil exports to India, the third largest energy consumer, quadrupled in March, Financial Times reported on Friday. Russia has so far exported 360,000 barrels of oil a day to India in March alone, nearly four times the 2021 average. The report cited Kpler, a commodities data and analytics firm, to say that Russia is on track to hit 203,000 barrels a day for the whole month, based on current shipment schedules.

“Geopolitical developments have posed significant challenges to our energy security. For obvious reasons, we have had to stop sourcing oil from Iran and Venezuela,” one of the people cited above said, referring to India’s decision to end oil imports from Iran and Venezuela – two of the cheapest sources of energy for New Delhi – because of US sanctions.

“India has to keep focusing on competitive energy sources. We welcome such offers from all producers. Indian traders too operate in the global energy markets to explore the best options,” the person said.

“India’s legitimate energy transactions should not be politicised,” the person added.

Energy from alternative sources has often come at a higher cost, and the jump in prices after the Ukraine conflict has added to India’s challenges. “The pressure for competitive sourcing has naturally increased,” the person said.

The people noted that India is highly dependent on imports for its energy requirements, and almost 85% of the country’s crude oil needs – or five million barrels a day – is imported. Most of these imports are from West Asia, with Iraq accounting for 23%, Saudi Arabia 18% and the United Arab Emirates 11%.

The people noted that Russia has so far been only a “marginal supplier” of crude oil to India, accounting for less than 1% of the country’s requirements and not figuring among the top 10 sources. There is also no government-to-government arrangement for energy imports, the people pointed out.

At a time when the United States (US) and its Western partners have stepped up pressure on India to take a stronger stance on the Ukraine crisis, the people pointed out that Russian oil and gas is being procured by countries across the world, particularly those in Europe.

Almost 75% of Russia’s total natural gas exports are to European states that are members of the Organisation for Economic Cooperation and Development (OECD), such as Germany, Italy and France. European countries such as the Netherlands, Poland, Finland, Lithuania and Romania are also large buyers of Russian crude.

Recent Western sanctions on Russia have carve-outs to avert any impact on energy imports from Russia, the people said. Russian banks that are the main channels for European Union payments for Russian energy imports have not been excluded from SWIFT, or the Society for Worldwide Interbank Financial Telecommunications, system.

“Countries with oil self-sufficiency or those importing themselves from Russia cannot credibly advocate restrictive trading,” the person said.

The people noted that the US too has become an important source of crude for India, accounting for 7.3% of the country’s needs. Imports from the US are expected to increase by up to 11% in the current year, taking its share of the Indian market to 8%.

India has so far refrained from condemning Russia’s invasion of Ukraine despite growing pressure from its Western partners, including from members of the Quadrilateral Security Dialogue, or Quad. The Indian leadership has repeatedly called for an immediate end to hostilities in Ukraine and a return to the path of diplomacy and dialogue.