Russian Crude Oil and India : Chapter of Huge Savings

Russia and India share a long standing relationship that is dated back when India got independent and even during the India China war. The Russian Government has always been standing behind India for its defence in the Security Forum of the world. Even for a permanent member nomination Russia always takes India’s stance to make it a member of the same. However other countries like China, U.S.A oppose the same due to the India Pakistan War over Kashmir. In our previous article it has been mentioned that crude oil imports have been one of the major commodity imports for India. India is the third largest importer of crude oil in the world. Out of the entire fleet only 10% of Indian crude oil came from Russia even after 50 times hike in the import rate given the special discount scheme from Russia.

Due to the Russian invasion of Ukraine the major crude oil importers banned Russian oil for imports in their  actions. This gave the Russian oils an excessive supply situation as the demand was low in comparison to the supply. Hence it turned to India for aid in the same and offered a special discount to it. Recently Pakistan also asked Russia to supply the crude oil to it at the rates given to India. However the nation denied the same to Pakistan.

Current Russian Oil Statistics

The current situation suggests that Russia has been the largest crude oil supplier for India in the month of March. 22% of the entire annual crude oil came from Russia. This was in comparison with OPEC and Saudi Arabia. Thus Saudi Arabia which was one of the major crude oil suppliers for India has now been overtaken by Russia. The Russian government has supplied approximately 1 million barrels of crude oil to India in the month of October. Before the discounts and increase in Russian Oil imports only 2.4% of the same was supplied by Russia. Hence the number displays an almost 920% hike in the oil imported from Russia. 

Reasons Behind the Increased Imports

The major reason behind the same is the heavy amount of discounts available to the Indian government by Russia. The Russian Oil since April has been available to the Indian government at a discount of 7 to 7.5%. Hence this means that if the Oil is available at 100 Dollars per barrel, it is available to India at 92.5 to 93 dollars per barrel. Hence given the discount rate and the fluctuation in prices of currencies as per Business Today, “ India has saved roughly One Lakh Sixty Thousand Crore Rs (1,16,000 Crore Rs) or more”. 

Due to the war in Ukraine the Crude Oil prices fluctuated and India being the third largest importer got affected from the situation. The crude oil prices touched almost the all time high prices of 2008 financial crisis and hence it affected India on the buying rates. On the other hand the currency valuation of India deteriorated in comparison to the U.S. dollar which made the situation even worse. 

The entire world economy suffered in this particular instance. However the Crude oil imports have to be made as the Indian economy needs the same for survival so the problem of high priced crude imports came into light. To solve all these problems at once the Indian government got into an agreement with the Russian government for a 7 to 7.5% discount in the crude oil prices which has now been proving extremely effective for the nation on the import front. 

India’s Foreign Minister’s Take on the Situation

Mr. S Jaishankar expressed in an interview that the nation is doing what anyone else would do. Doing the best for the people of the country. If the crude oil is available at a heavy discount to the nation from Russia then it would take it. Also this is not in relation to the former relations between both the nations. Hence one needs to understand that whatever India is doing is not to support Russia in the war situation but looking out for the best interests of its people.

Indian Prices

The prices of retail sale of petroleum products have not been affected much because as per the government the prices were not increased heavily during the price rise. In other words when the prices of crude oil increased, very minimal impact was given on the prices of petrol and diesel. This is the reason why there is only a minimal change in the prices of the products even though the Indian government is getting heavy discounts on the imports of crude oil.

However the situation persists. It can be noticed that India is becoming a powerful nation gradually. Given the fact that against the wishes of the EU the Indian government went ahead and sought Russian Oil shows that India is not fearing any threats or warnings and is looking out for what is best for its people.