Even as the Group of Seven (G7) price cap on Russian crude oil enters into force as of December 5, India has been assured it will continue to receive the existing deep discounts on Russian oil, for the time being, informed officials.
“We have been assured by our Russian partners of uninterrupted crude supplies at the existing rates for the time being.
"There were a lot of reports of changes in (India’s) buying patterns after the global price cap took hold.
"But Indian refiners will continue benefiting from favourable purchase pacts,” said a senior official.
India stoutly defended its import of crude oil from Russia amid the Ukraine conflict with External Affairs Minister S Jaishankar asserting that New Delhi's procurement was just one-sixth of the European purchase in last nine months.
The price of crude supplies and potential fallouts of the price cap are also being discussed between both governments, he added.
The talks are a continuous process, but usually cover supplies for the next one to two months, he added.
Moscow remained in a tough spot as the remaining buyers of Russian crude, such as India and China, were demanding a deep discount in its flagship crude grade, Urals, even before the price cap.
The average discounts remain as high as 40 per cent on Urals, compared to the benchmark Brent crude prices, international media reported last week from Moscow.
After shrinking for a few months from May, the level of discount has remained fairly high in recent months, an official at a state refiner said.
India’s largest historical oil supplier — Iraq — had undercut Russia beginning late June, by supplying a range of crudes that on average cost $9 per barrel less than Russian oil.
The extremely price-sensitive market had, therefore, shifted heavily in favour of Iraq. “But Russia began offering more discounts immediately afterwards,” he added. Even without the price argument, the government is of the opinion that a stable supply of crude should be established from outside the West Asian region.
“While oil imports from Iraq have remained the mainstay of our purchases, given global complications and Iraq’s volatile internal situation, India needs to create alternative mechanisms,” said another official.
The share of Russian crude, which was just 0.2 per cent of the total crude import volume before Russia invaded Ukraine in February, has risen to a record 24.8 per cent in the April-September period, according to commerce department data.
This was ahead of the United Arab Emirates’ 19.5 per cent and Iraq’s 7.16 per cent. India imports nearly 85 per cent of its fuel requirement.
In October, India imported 936,556 barrels per day (bpd) from Russia, reveals estimates by London-based commodity data analytics provider Vortexa, which tracks ship movements to estimate imports.
This represents the highest-ever volume of oil imported from Russia and a steep jump from December 2021, when imports stood at only 36,255 bpd.
Global price cap.
After months of wrangling between the G7 nations, namely Canada, France, Germany, Italy, Japan, the UK, and the US, along with the European Union (EU) and Australia, the price cap plan comes into effect on December 5.
It will be implemented concurrently with a separate ban on Russian seaborne crude shipments by EU nations.
The Western allies hope to financially squeeze Moscow, which has continued to benefit from soaring energy prices and severed its means of financing the invasion of Ukraine.
A further ban on refined products will apply from February 5, 2023, the EU has said.
India, being the second-largest oil importer globally, has been requested multiple times to join the price cap, especially by the US.
However, Washington DC had consistently taken a soft tone on the matter. In November, US Secretary of the Treasury Janet Yellen said discounted Russian oil makes economic and geopolitical sense for India and the US was keen to see India benefit.
However, she added that New Delhi was free to continue buying oil from Russia as long as it doesn’t use Western financial services like insurance, shipping, and banking.
With additional inputs from PTI
