News
Russia now largest oil exporter to India
Summary
India has significant import requirements for crude, as 80% of its oil needs comes from importsNEW DELHI : Russia was the largest exporter of crude oil to India by value in February in spite of the western price cap of $60 per barrel, official data showed on Thursday.
Crude imports from Russia in February stood at $3.35 billion, followed by Saudi Arabia at $2.30 billion and Iraq $2.03 billion.
Between April and February Indian import of Russian oil jumped to $27 billion, second only to imports from Iraq which stood at $30 billion, making Moscow the second largest crude exporter to New Delhi in FY23.
Other top exporters included Saudi Arabia at $26.8 followed by the UAE $15.6 billion, US at $10.05 billion and Kuwait at $7.59 billion.
Despite the price cap that was imposed in December, Russia emerged as the top oil exporter in February at $3.35 billion, followed by Saudi Arab $2.30 billion and Iraq $2.03 billion, indicating little change in import trens.
India has significant import requirements for crude, as 80% of its ol needs come from imports—and a large part of this is now being met from Russia. It is in India’s strategic interest to continue to buy Russian crude, even above the price cap, said Deepto Roy, Partner, Shardul Amarchand Mangaldas & Co.
“Whether Indian companies need to buy above the price cap would depend on a number of factors - including whether there is adequate supply from alternative sources. Indian law does not recognize or subject Indian entities to sanctions with respect to purchase of Indian crude," Roy added.
But companies may be subject to sanctions through exposures to international banks, shareholders or directors, Roy added. The sanctions regime is complex and far-reaching and accordingly Indian companies should obtain specific legal advice on how sanctions may impact them and how they may proceed, he added.
Recently, BP’s chief economist Spencer Dale said the price cap imposed by G7 countries was intended to ensure adequate supplies from Russia while capping its oil revenue. He noted that with that goal in view, the price cap has worked better than anticipated.
Russia emerged as a major supplier to India for the first time in FY23 after it started giving oil at discounted rates amid the Ukraine war.
Despite concerns raised by the west to India’s imports from Russia during the war, India has taken a strong stand and said that it looks at all options to achieve energy security.
Recently, finance minister Nirmala Sitharaman said India could purchase Russian oil even if the price reached near or crossed the cap.
A ICRA report, however, said that sea-borne exports from Russia witnessed a significant decline in the first week of April 2023 to around 2.89 million barrels per day (mbd) from around 5 mbd at the end of 2021 indicating the impact of the production cuts by Russia.
“This is likely to keep the supplies tight in the market," it said.
