In the face of international scrutiny, India has staunchly defended its substantial purchases of Russian crude oil since the onset of the Ukraine war.
A recent report from a parliamentary panel highlighted that all import deals were executed within the scope of Western sanctions imposed on Moscow for its involvement in the conflict, as per S&P Global.
The report emphasised that these purchases, totalling an estimated 1.95 million barrels per day (b/d), were pivotal in averting potential chaos in the crude oil market and preventing a surge in prices by approximately USD 30-USD 40 per barrel.
India's imports of Russian oil
According to the Petroleum and Natural Gas Ministry, India's increased imports of Russian oil after Russia's invasion of Ukraine in February 2022 prevented "havoc" in the global oil market. The ministry said that if India had not increased its imports, global crude oil prices would have increased by around USD 30-40 per barrel.
The parliamentary panel report quoted a representative from the petroleum ministry, stating that Indian oil and gas companies meticulously adhered to international laws and sanctions.
Importing Russian oil, despite facing currency and payment challenges, was deemed crucial to maintaining stability in global oil prices.
The report underlined the strategic importance of these Russian crude imports, asserting that it not only benefitted Indian consumers with lower retail fuel prices but also played a role in easing the global supply situation.
The official further justified these transactions, noting that Indian refiners followed all prescribed price caps, rules, and regulations within the financial domain.
Despite the economic sanctions complicating logistics arrangements for Indian buyers, such as the availability of ships and insurance, the report outlined the measures taken to navigate these challenges.
Indian buyers, including major entities like Indian Oil Corporation, opted for delivery-based arrangements, with sellers assuming responsibility for delivering crude oil with suitable insurance coverage at discharge ports in India.
The parliamentary panel acknowledged the payment challenges faced by Indian buyers due to economic sanctions, citing difficulties in processing payments for crude oil imports in U.S. dollars through Indian banks.
However, it emphasised the meticulous adherence to international financial channels like SWIFT.
Russia remains a primary supplier, contributing over 35 per cent of India's total crude imports in October and approximately 1.58 million b/d in November.
Russian crude imports
Projections from S&P Global Commodity Insights estimate Russian crude imports to reach around 1.73 million b/d in 2023.
The report also highlighted the currency woes associated with crude oil imports, constituting about 25 per cent of all merchandise imports.
In response, the Indian government has explored options to settle crude oil imports in rupees to alleviate the impact on the trade deficit.
The Reserve Bank of India introduced additional arrangements for invoicing, payment, and settlement of exports and imports in rupees.
Addressing the need for diversification, the parliamentary panel recommended the petroleum ministry explore further diversification of crude oil imports.
Currently, over 60 per cent of crude imports by state-owned refiners come from the Persian Gulf region.
The panel emphasised the importance of modernising vintage refineries to enhance their capabilities in processing a wider variety of crude oil, contributing to a more resilient and cost-effective import strategy for India.