Energy Trade

When Western nations imposed sanctions on Russian oil following the February 2022 invasion of Ukraine, Russia needed new customers urgently. India emerged as the primary beneficiary. Indian refiners (Reliance, IOC, BPCL, HPCL, MRPL) began purchasing Russian Urals crude at discounts of approximately $25–35/barrel below the Brent benchmark — eventually converging to approximately $10–15/barrel discount as the initial panic faded. This represented a massive windfall for India: at 40 million tonnes/year (~800,000 bbl/day) of Russian crude and a $15/bbl discount, India saved approximately $4–5 billion per year in its oil import bill. By 2023, Russia became India's largest single crude supplier (~40 MT, ~17% of total imports). The benefits: lower oil import costs, lower petrol/diesel retail prices (contributing to controlled inflation), and improved current account. The risks and costs: (1) Diplomatic: India was criticised by G7 nations for providing revenue to Russia funding the war; India defended the decision as national economic interest; (2) Logistics: Reliance and other Indian refiners had to arrange alternative insurance (abandoning Lloyd's P&I Clubs after Western insurers restricted Russian cargo coverage) — using Indian and Middle Eastern insurers; (3) Price cap: G7 imposed a $60/bbl price cap on Russian oil — India initially ignored it, then adapted to ensure compliance as Russian prices came below the cap anyway; (4) Payment: Western correspondent banks refused USD payments for Russian oil, forcing India-Russia bilateral rupee-ruble settlement talks — these moved slowly; (5) Dependency risk: concentrating ~17% of imports in one politically complex supplier increases supply vulnerability. Net assessment: a rational short-term commercial decision that created longer-term dependency and diplomatic friction. Source: PPAC India · IEA Oil Market Report 2024 · Ministry of External Affairs India.