India’s Russia connection is getting more attention now than ever after the Asian country recently emerged as the largest petroleum products supplier to Europe ahead of Saudi Arabia. It’s an achievement considering the world’s most populous country with 1.4 billion people domestically produces only a fraction of its requirements. In the 2021-22 financial year, it produced 29.69 MMT (Million Metric Tons) of crude oil, according to the country’s Ministry of Petroleum and Natural Gas website. Moreover, Indians consumed 204.23 MMT of petroleum products that year, which was 5.11% more than the previous year.
A recent Bloomberg report said that India overtook Saudi Arabia, the world’s third-largest oil producer, as the largest exporter of petroleum products to the energy-hungry Europe. This is attributed to the cheap crude oil India has been importing from Russia since the beginning of the Ukraine war and exporting back to Europe.
Most of Europe banned or drastically cut all trade ties with Russia after the Kremlin invaded its smaller neighbor disregarding world opinion.
India’s oil imports from Russia have galloped to more than 36.4% of its total oil imports from 3% before the Ukraine war. Russia has replaced Iraq and Saudi Arabia, the top two suppliers until then, as India’s largest supplier of crude. In April 2023, refiners in India imported 1.65 million barrels per day (mbd) of crude oil from Russia, as the international trade data website Trading Economics reported.
The South Asian nation’s robust show in petroleum exports flows from its impressive refining capacity which is the fifth largest in the world. It exported 62.71 MMT of petroleum products as of 2021-22, according to the government website.
Its crude oil imports totaled 4.24 million barrels per day in 2021 making it the third largest importer after China and the U.S. New Delhi still managed to export more petroleum products than earlier during that period.
According to data from Indian government ministry’s website, the country imported 228.6 MMT of crude oil in the 2018-2019 fiscal year, which increased to 248.3 MMT in the 2019-2020 fiscal year. It increased to 255.8 MMT in 2020-2021.
Prime Minister Narendra Modi seems to have driven a hard bargain with Moscow to buy oil at discounted rates, which, according to some reports, were as much as 30% less than the market price. The quantum of discount that New Delhi gets is considerable considering Russia’s Urals crude trades much lower than Brent. On May 10, Urals was trading at $60 a barrel when compared to Brent’s $76.87.
A CNN Business report in March 2023 said New Delhi has steadily increased its oil intake from Moscow. Traditionally, India, which imports 80% of its oil, used to buy only about 2% of its crude requirements from Russia until the war broke out. But, with oil prices shooting up this year, New Delhi has increased its intake from Moscow, lapping up the heavy discounts.
CNN quotes Refinitiv saying that Russian crude flows to India rose to 1.01 MMT in April from 430,000 MMT in March. India has been playing down the import spike, according to CNN, which cited a Ministry of Petroleum and Natural Gas statement that said the country imports oil from all over the world, including a significant volume from the United States.
“Despite attempts to portray it otherwise, energy purchases from Russia remain minuscule in comparison to India’s total consumption,” the ministry said adding: “India’s legitimate energy transactions cannot be politicized,” it added.
India’s domestic consumption steadily rose after the COVID-19 lull, spurring more imports. Consequently, the country’s petroleum exports continued a declining trend until it reversed after the Russia-Ukraine war began. In 2019-20, the imports picked up amid the pandemic recovery towards the latter part of the fiscal year, touching 44 MMT. It, however, declined to 43 MMT in 2020-21 and edged down to 42 MMT in 2021-22. After the war began in February 2022, India’s imports from Russia picked up considerably.
In 2016-17, India’s petroleum exports were 64.2 MMT, which declined to 60.9 MMT in fiscal 2017-2018. The exports further slumped to 56.77 MMT in 2018-19, widening the country’s trade deficit, which is the difference between the value of imports and exports. In 2019-20 the exports rose to 65.69 MMT but eased to 56.77 MMT in 2020-21 as the pandemic raged across the world stunting consumption. It recovered to 62.71 MMT in 2021-22.