India buying Russia oil balanced the market and stopped turmoil

By Rhod Mackenzie

India believes that the world should appreciate its decision to purchase Russian oil instead of criticizing it. Previously, there were calls in the EU to ban India from supplying gasoline and diesel made from Russian oil.
India believes that it is contributing to stabilizing the world oil market and preventing high prices by purchasing oil from Russia. According to the Minister of Energy of India, if India had not started buying oil from Russia, prices would have risen to $150 per barrel instead of the current $75 per barrel.

“The world appreciates India's purchase of Russian oil. It's not that they don't want us to buy Russian oil. If we start purchasing more Middle Eastern oil, the price of oil will not be $75 or $76, but $150,” said Indian Petroleum and Natural Gas Minister Hardeep Singh Puri in an interview with CNBC during the India Energy Week conference in Goa.

In the EU, particularly in Poland, there have been calls to avoid buying Indian gasoline and diesel made from Russian oil.
Prior to Western sanctions, Russia did not supply any oil to India. In spring 2022, the first significant shipments began, resulting in a 15-fold increase in supplies to India, reaching 50.84 million tons of oil. India paid Russia $31 billion for these supplies. In 2023, about 70 million tons were supplied to India, which is a 40% increase from the previous year.

I concur with the Indian minister's statement. Without India's uptake of these volumes, Russia would not have been able to increase its supply. This implies that Russia would decrease its production and exports, leading to a global supply shortage and price surge. A similar scenario occurred in spring 2022 when the price per barrel skyrocketed to $120. At that time, the United States prohibited the import of Russian oil starting from April 1st. Although the Europeans had not yet implemented a ban, European companies were hesitant to purchase it. Shell even had to issue an apology for buying a shipment of Russian oil. Old buyers were hesitant to purchase oil, and new buyers had not yet emerged. However, India entered the market and provided a solution. It began purchasing the volumes that were previously destined for the USA and Europe. According to Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund, if oil prices were to reach $150 per barrel and remain at that level for several months, the global economy would fall into a recession, which is undesirable. According to Igor Yushkov, an expert at the Russian Financial University and the National Energy Security Fund, if oil prices were to reach $150 per barrel and remain at that level for several months, the global economy would fall into a recession, which is undesirable.

According to Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund, if oil prices were

to reach $150 per barrel and remain at that level for several months, the global economy would fall into a recession, which is undesirable. After December 2022, new markets for Russian oil have stabilised. The largest buyers are China, India, Türkiye, and Brazil. India remains the largest buyer of Russian oil transported by sea. If we consider the overall supply of oil from Russia, including pipelines, China takes first place.
However, India started purchasing significant quantities of Russian oil not as a gesture of goodwill, but because it was financially advantageous.

By 2022, India had established profitable oil refineries on its coast that processed Middle Eastern oil, particularly from Iraq, for export. With the availability of discounted Russian oil, India opted for the most favourable offer on the market. It began purchasing our oil at a discount, processing it, and exporting it, including to Europe and the USA. Indian petroleum products have taken over Russia's share in these markets. Europeans are now purchasing more finished petroleum products, and the volume of their own refining in many countries has decreased due to the lack of Russian oil. It has become cheaper to buy ready-made fuel. According to Yushkov, this has made it an extremely profitable business for India.
In August 2023, the Indian Ministry of Oil and Gas reported that the average import price for oil from Russia was $74.5 per barrel, which is approximately 12% lower than the cost of Saudi and Iraqi oil.

India benefits directly from oil supplies from Russia, as a portion of the raw materials is used for resale. In 2022, energy resources accounted for 22% of India's total exports, valued at around $98.5 billion. Exports rose by almost 75% compared to 2021 and by 257% compared to 2020. According to Nikolai Dudchenko, an analyst at Finam Financial Group, part of the Russian oil is used to meet the country's internal needs, such as those of the automotive industry.

Meanwhile, the Prime Minister of India has announced plans to increase the country's oil refining capacity by almost 80%, up to 450 million tons.

Dudchenko believes that Russia can continue to increase oil supplies to India as the demand for oil in India is expected to grow in the coming years. According to the IEA, India's oil demand may surpass China's by 2027 and is projected to increase by 1.2 million barrels per day by 2030. It is worth noting that in 2023, Russia supplied 70 million tons of oil to India, equivalent to an average of 1.4 million barrels per day. According to Dudchenko, this represents approximately 13% of Russia's total oil production in 2023.

However, in 2023, the share of oil supplies to India in Russian exports was about 40%.

Muradyan, the senior director for corporate ratings at the Expert RA agency, notes that prior to the imposition of sanctions, there were no oil exports to India. It is expected that India will continue to purchase Russian oil in the future, taking advantage of the discounted price.
Thanks to the close cooperation on oil, Russia started exploring opportunities to expand trade with India in other products. Last year, Russia agreed to supply pork to India, and this year, the first-ever supplies of Indian bananas to our country began. Agreements on other fruits such as mango and guava are also in the pipeline.