NEW DELHI - India is playing an increasingly important role in global oil markets, buying more and more cheap Russian oil and refining it into fuel for Europe and the United States.
Yet New Delhi has faced little public blowback because it is meeting the West’s twin goals of crimping Moscow’s energy revenue and preventing an oil supply shock.
And as Europe ramps up sanctions, India is only going to become more central to a global oil map that has been redrawn by Russian President Vladimir Putin’s year-long war in Ukraine.
“US Treasury officials have two main goals: keep the market well supplied, and deprive Russia of oil revenue,” said Mr Ben Cahill, a senior fellow with the Centre for Strategic and International Studies, a Washington think-tank. “They are aware that Indian and Chinese refiners can earn bigger margins by buying discounted Russian crude and exporting products at market prices. They’re fine with that.”
India shipped about 89,000 barrels a day of petrol and diesel to New York in January, the most in nearly four years, according to data intelligence company Kpler. Daily low-sulphur diesel flows to Europe were at 172,000 barrels in January, the most since October 2021.
The Asian nation’s importance is expected to expand after fresh European Union sanctions on Russian petroleum exports take effect on Sunday. The ban will remove a huge volume of diesel from the market and see more consumers, especially in Europe, tap Asia to fill the supply gap.
That will make cheap Russian oil even more attractive to India, which relies on imports to meet around 85 per cent of its crude needs. The nation’s refiners, including state-run processors that are responsible for meeting domestic demand, ramped up exports in 2022 in order to profit from higher international prices.
“India is a net exporter of refined product and much of this will be going to the West to help ease current tightness,” said Mr Warren Patterson, Singapore-based head of commodities strategy at ING Groep. “It’s pretty clear that a growing share of the feedstock used for this product originates from Russia.”
Under EU guidelines, India is likely operating within the rules. When Russian crude is processed into fuels in a country outside the bloc, such as India, the refined products can be delivered into the EU because they are not deemed to be of Russian origin.
The Group of Seven nations are keen to cut Moscow’s revenue as much as possible, but they also have an interest in ensuring Russia’s oil and refined products continue to flow to avoid a global supply crunch, said Ms Serena Huang, lead Asia analyst at Vortexa.
A key facet of the mechanism to crimp revenues to the Kremlin and keep some oil on the market has been a price cap on Russian crude, a measure that was spearheaded by the US. India has not publicly said if the nation does or does not adhere to the limit, but sanctions have driven oil from the Opec+ producer below the US$60 a barrel cap.
A US National Security Council spokesman said a price cap had been put in place that countries including India could leverage to keep energy markets stable, while limiting the Kremlin’s revenue.
“India’s willingness to buy more Russian crude at a steeper discount is a feature, not a bug, in the plan of Western nations to impose economic pain on Putin without imposing it on themselves,” said Mr Jason Bordoff, founding director of the Centre on Global Energy Policy at Columbia University and a former adviser in the Obama administration.
Executives and officials from nations and companies including Saudi Arabia, the United Arab Emirates, the US, and Abu Dhabi National Oil Company are gathering in Bangalore on Monday for a three-day energy forum organised with India’s petroleum and natural gas ministry. BLOOMBERG
