How Indian Economy Benefitted From Discounted Russian Crude Exports

In the first half of the current financial year (FY24), Indian refiners have made substantial savings of approximately $3.3 billion through their procurement of discounted Russian crude oil, as reported by Indian Express.

Analysis of India's official trade data for the period spanning April to September revealed that Russia, which previously played a marginal role in India's oil supply, emerged as the country's largest oil source, accounting for nearly 39 per cent of India's total oil imports by volume and almost 36 per cent by value.

What's even more intriguing is that India's oil imports from Russia were being hailed in some quarters as a win-win situation for the entire global economy. 

The country's leading oil player, Oil and Natural Gas Corporation (ONGC), has pointed out that by opting for Russian crude, India has effectively cleared up more space in the Gulf for other oil-thirsty nations, especially in Europe.  

What this effectively means is that since India is no longer importing as much oil from the gulf as it used to due to the price reduction by Russia, it freed up the gulf oil for European nations as they could no longer buy the russian oil given the sanctions.

After Russia invaded Ukraine on 24 February 2022, the world responded with a relentless barrage of sanctions. 

While these measures couldn't prevent the initial aggression, they were aimed to hit Russia's economy hard and put a significant dent in its ability to sustain the conflict in Ukraine.

However, India, which has traditionally good ties with Moscow, chose to remain neutral despite multiple attempts by West to coerce New Delhi to toe its line on the Ukraine war.

India's neutral stance has so far been successful as New Delhi's strategic moves in the realm of crude oil trade, especially with Russia, have set the stage for some fascinating developments.

As Western countries reduced oil imports from Russia following the conflict in Ukraine in February 2022, Moscow began offering significant discounts on its crude. 

Indian refiners seized this opportunity, catapulting Russia to the forefront of New Delhi's oil suppliers.

India, being the world's third-largest consumer of crude oil, depends on imports for over 85 per cent of its requirements. 

For the first six months of the ongoing financial year, the total value of India's oil imports amounted to $63.86 billion. 

Had Indian refiners paid the average per-barrel price they paid for crude from all other suppliers for Russian oil, the oil import bill would have reached $67.14 billion. 

The average landed price of Russian crude for Indian refiners during this period was $71.83 per barrel, which was $10.32 lower than the average landed price of non-Russian crude. 

This represents an effective discount of 12.6 percent compared to oil imported from other supplying nations.

India also adopted a unique role in the global oil market. It has been refining a substantial portion of its imported Russian crude oil into petroleum products.

These products are then exported to countries that have either sanctioned Russian crude or those that have largely remained neutral.

India's exports of petroleum products to the Netherlands, for example, surged by a remarkable 70 per cent, making it the top supplier of oil products in Europe.

As Russia wavered on the brink of a severe financial crisis after the invasion, the rouble's external value plummeted by nearly 30 per cent within days.

However, the impact of the sanctions against Russian oil by the western nations is something that still needs to be fully assessed.

Amid this ever-shifting global economic landscape, India's astute strategy of procuring discounted Russian crude oil not only shielded its economic interests but also presented newfound opportunities for other nations.