Western sanctions have put the Russian economy in a tight spot and made it tough for it to stay afloat. Amidst this, Russia is now offering more crude oil to India. Is it a wise move for India to accept considering that it is already on a tightrope with respect to taking sides during the crisis? Why is Russia making these offers? We discuss these points and more.
How much oil does India import?
An article by Hindustan Times quotes sources saying that 85% of India’s crude oil requirements on a daily basis come from imports. These are from West Asia, with Iraq accounting for 23%, Saudi Arabia 18% and the United Arab Emirates 11%. Russia does not have a major role in this supply, according to the sources in the article, as it accounts for around only 1% of these daily imports. Why is this figure looking at being increased is the question.
Why the sudden move?
India has had longstanding bilateral ties with Russia in the areas of economic development and even security. This partnership had grown in recent years with Russia supplying military arms and ammunition to India and contributing the factors essential for India to strengthen its defence sector. In wake of the recent Russia Ukraine crisis, western sanctions and their imposition have made it difficult for the Russian economy to be stable.
European countries had exempted Russian banks that dealt with energy trade as the continent is widely dependent on Russian oil, however, the US had announced a complete band on Russian petroleum products beginning from March 8. In the wake of this announcement, Russia is facing a loss of US imports of 7,00,000 barrels of oil per day. Hence, if something isn’t done soon, there will be unsold stocks that the country will have to deal with. Following this, Russia has made an offer to India for increasing the imports of crude oil at discounted rates.
An Indian government official was quoted telling Reuters "Russia is offering oil and other commodities at a heavy discount. We will be happy to take that. We have some issues like a tanker, insurance cover and oil blends to be resolved. Once we have that we will take the discount offer.”
A possible strengthened India-Russia partnership?
Russian Deputy Prime Minister Alexander Novak in a conversation with Petroleum Minister Hardeep Puri spoke about this increase in oil exports. A statement was later issued by the Russian Government about the same. “Russia’s oil and petroleum product exports to India have approached $1 billion, and there are clear opportunities to increase this figure.” The statement went on to say that the two Ministers discussed “current and potential joint projects in the fuel and energy industry and noted that current projects continue to be steadily implemented.”
The statement quoted the Russian Minister as saying “We are interested in further attracting Indian investment to the Russian oil and gas sector and expanding Russian companies’ sales networks in India.”
Speaking about this increase in import of crude oil, Finance Minister Nirmala Sitharaman acknowledged that Russia had made an “open offer” to India for the discounted sale of crude oil. She went on to say that the decision that would be taken by the Government would depend upon many factors.
Indian Oil to sign a deal with Russian oil company
According to ndtv.com., Indian Oil Corporation Limited is reported to have entered into a deal with a Russian oil company. This deal allows Indian Oil to import 3 million barrels of crude oil.
In times of a crisis, when the world has had to pick a side between Russia and Ukraine, India has maintained a diplomatic stance and pushed for discourse, peaceful talks, negotiations and an end to the violence. In spite of this diplomatic facade, if India enters into an oil deal with Russia it may give rise to speculation as to whether the country is actually supporting the Soviet country’s invasion of Ukraine. However, Government sources urged for this deal not to be seen in a political light. The US, however, was not of the same opinion.
They were quoted as saying, "India importing discounted crude oil from Russia wouldn't amount to a violation of sanctions; it would imply supporting the Russian invasion of Ukraine.”
In light of the matter, White House Press Secretary Jen Psaki was quoted saying, "I don't believe this would be violating that (sanctions)."