India continues to hunt for the price of Russian crude as the conflict steers traditional buyers of Moscow away from those barrels and traders, stuck with shipments, begin massive discounts. India has chosen to import crude oil from Russia despite pressure from developed nations to avoid shipments after Moscow decided to attack Ukraine.
The country has emerged as the second largest buyer of Russian crude after China. Russian oil accounting for 12% of total oil purchases of the country compared to less than 1% before the war. In July, Russia became India’s second-largest oil supplier, leaving Saudi Arabia in third place. Although Riyadh regained its position in August, Russia remains India’s third-largest oil supplier, Reuters reported, citing trade data.
Data from the commerce ministry shows that between April and July, India’s mineral oil imports from Russia increased more than eightfold to $11.2 billion, compared with $1.3 billion in the same period. last year. Since March, when India increased its imports from Russia, imports have reached $12 billion, compared with more than $1.5 billion last year. About $7 billion of these imports took place in June and July.
Oil prices are important to India as the country meets 83% of its demand through imports, which leaves the economy vulnerable. The country’s oil import bill doubled to $119 billion between 2021-22, stretching government finances and weighing on the post-pandemic economic recovery.
Earlier this month, the finance minister Nirmala Sitharaman said in a conference that importing oil from Russia is part of the strategy to manage inflation and other countries are doing the same.
In a word, refiners buy oil, not the government. But cheaper oil has a positive effect on the macroeconomic parameters of the economy. They keep costs down, control current account deficits by reducing import bills and reducing demand for dollars. The government subsidy bill also went down, leaving money for social welfare and infrastructure.
This is the second time that bargain hunting in the global oil market has saved India money. In 2020, when oil prices plummeted due to pandemic outbreak around the world, the government filled strategic reserves and refineries stored oil in ships to save Rs 25,000 crore when prices rose later. then, as first reported by TOI on May 5 of that year.
The flow of Russian oil to India continues as traders work through sanctions-related issues in shipping, insurance and banking to keep shipments attractive enough for interested buyers. .