NEW DELHI, Dec 15: India’s imports of Russian crude oil reached their lowest level since June 2022 in November, yet the Kremlin remains the primary supplier of oil to India, as highlighted by a monthly report from a European think tank.
Since Moscow’s invasion of Ukraine in February 2022, India has emerged as the second-largest buyer of Russian crude oil, with its share rising from under 1% to nearly 40% of the country’s total oil imports.
This surge in imports was largely driven by the discounted prices of Russian crude, which became more attractive compared to other international oil sources due to price caps and the European Union’s withdrawal from purchasing Russian oil.
According to the Centre for Research on Energy and Clean Air (CREA), “India’s imports of Russian crude oil saw a significant decline of 55% in November, marking the lowest level since June 2022.”
Russia continues to be India’s largest oil supplier, followed by Iraq and Saudi Arabia.
CREA reported that China accounted for 47% of Russia’s crude exports, with India contributing 37%, followed by the EU and Turkey, each with 6%.
In November, the discount on Russia’s Urals crude rose by 17% month-on-month, averaging USD 6.01 per barrel less than Brent crude. The discount for ESPO grade fell significantly by 15% to an average of USD 3.88 per barrel, while the Sokol blend’s discount decreased by 2% to USD 6.65 per barrel.
Russia primarily sells ESPO and Sokol grades of crude oil to India, along with smaller amounts of coal.
Since December 5, 2022, through the end of November 2024, China has purchased 46% of Russia’s coal exports, with India, Turkey, South Korea, and Taiwan following as significant buyers.
Overall, in November, India dropped to the third position among the largest purchasers of Russian fossil fuels, accounting for 17% (EUR 2.1 billion) of Russia’s monthly export earnings from its top five importers. Notably, Russian revenues from crude oil exports to India declined by 22% in November.
Despite an 11% overall decrease in India’s crude oil imports in November, Russian imports experienced a dramatic drop of 55%.
India imports over 85% of its crude oil, which is subsequently refined into fuels like petrol and diesel.
To limit financial support for Russia’s military efforts, the G7, EU, and Australia imposed an embargo on Russian crude and a USD 60-per-barrel price cap in December 2022. This measure significantly impacted revenues over the following year, compelling Russia to seek alternative markets and transport methods for its oil.
To adjust, Russia began offering substantial discounts on its Urals grade crude.
CREA notes, “Two years post-imposition of the price cap, sanctions have driven a 15% drop in Urals prices, resulting in an estimated loss of EUR 14.6 billion in revenues.” In the second year of sanctions, losses from Urals crude exports are estimated at EUR 4 billion, while the first half of 2024 alone saw revenue declines of EUR 2.5 billion.
Despite the price cap’s intended fiscal impact, its effectiveness has waned due to insufficient enforcement and a failure to adjust the cap. As a result, Russia has managed to bypass the cap and tap into new markets over time, particularly in the sanctions’ second year.
In the first year of sanctions, Russia lost an average of 23% of its Urals crude export revenues monthly due to the price cap; this decreased to only 9% in the second year. By October 2024, this revenue loss had diminished to 63% less than it had been in January.
“With the establishment of a network of ‘shadow’ tankers, Russia is now able to sell its oil above the cap to new markets in non-sanctioning countries,” CREA concluded. (PTI)
