How India is helping West meet its energy demand by importing Russian oil

Since Russia invaded Ukraine in February 2022, India has emerged as one of the biggest buyers of Russian oil. Last week, a report by the BBC said India’s imports of Russian oil rose tenfold last year, according to Bank of Baroda. “In 2021 Russian oil accounted for just 2% of India’s annual crude imports. That figure now stands at almost 20%,” it added.

However, India hasn’t yet faced a significant blowback for getting Russian oil as the country is helping the West meet its energy demands. The access to cheap crude oil has allowed the country’s refiners to register massive profits and export record-level refined petroleum products to Europe and the USA. For instance, Indian refiners exported an average of around 284,000 barrels per day (bpd) of refined petroleum products to Europe in the December-April period, up from about 170,000 bpd in the year-ago period, as per data from Vortex.

This has angered politicians such as Borrell, who are blaming Delhi for making a profit by using cheaply bought Russian oil and, in turn, helping Moscow’s economy stay afloat. Meanwhile, India has defended its purchase of oil by saying that given its huge reliance on energy imports and with millions living in poverty, it isn’t in a position to pay higher prices.

Responding to Borrell’s latest remarks, External Affairs Minister S Jaishankar said: “My understanding of the Council regulations is that Russian crude, if substantially transformed in a third country, is not treated as Russian anymore.”

What are the sanctions against Russian oil products?

Soon after the Russian invasion of Ukraine, the European and Western countries started to curtail their dependency on Moscow’s energy imports in a bid to squeeze its economy. For instance, Germany suspended the launch of the new Nord Stream natural gas pipeline and Canada and the US banned the import of Russian crude oil.

With the war dragging on in the following months, these nations decided to impose stricter sanctions on Russia to further dent its finances. On December 5, 2022, the Group of Seven Nations – Canada, France, Germany, Italy, Japan, the United Kingdom and the United States – the European Union and Australia enforced a “price cap” on Russian crude. “The price cap prohibits Western shippers and insurers from getting involved in trade of Russian oil if it trades above $60 per barrel.,” The Indian Express reported.

As most of the oil tankers taking Russian oil are European and more than 90 per cent of the global insurance for freighters by tonnage is made available by European companies, experts believed the price cap imposition would cripple Moscow’s economy and severely impact its ability to fund its battle against Ukraine. However, Russia responded by increasing its oil exports to India and China.

How is India helping the West meet its energy demand?

As the sanctions imposed on the import of Russian oil aren’t applicable to India, the amount of fuel from Moscow entering the country has reached a record high. This has allowed India to not only easily meet its own energy demands but also that of other countries, especially the Western nations, who have been facing an energy crisis ever since the Russia-Ukraine war started.

A Bloomberg report published in February noted that India is importing more and more oil from Moscow and refining it into fuel, which is being supplied to Europe and the US — notably, the Russian oil refined in India isn’t considered to be of Russian origin.

“India is a net exporter of refined products and much of this will be going to the West to help ease current tightness,” Warren Patterson, Singapore-based head of commodities strategy at ING Groep NV, told Bloomberg. “It’s pretty clear that a growing share of the feedstock used for this product originates from Russia.”

Therefore, it didn’t come as a surprise when last month’s data from Kpler and Vortexa showed that India’s diesel exports to the Europe rose 12-16% to 1,50,000-1,67,000 bpd in the last fiscal year. It was also revealed that India boosted its vacuum gas oil (VGO) shipments to the US.

“The US took about 11,000-12,000 bpd of VGO in 2022-23, or 65-81% of India’s overall exports of the refining feedstock that can be processed further to produce fuels such as gasoline and diesel, the data showed.,” Reuters reported.