India wants Russia to discount its oil to less than US$70 a barrel

India wants the discounts to compensate for additional hurdles such as securing financing for purchases. PHOTO: EPA-EFE

NEW DELHI (BLOOMBERG) - India is trying to get deeper discounts on Russian oil to compensate for the risk of dealing with the Opec+ producer as other buyers turn away, according to people with knowledge of the matter.

The South Asian nation is seeking Russian cargoes at less than US$70 a barrel on a delivered basis to compensate for additional hurdles such as securing financing for purchases in high-level talks between the two countries, said the people. Global benchmark Brent is currently trading near US$105 a barrel.

Both state and private refiners in the world's third-biggest oil importer have bought more than 40 million barrels of Russian crude since the invasion of Ukraine in late February, the people said. That is 20 per cent more than Russia-to-India flows for the whole of 2021, according to Bloomberg calculations based on ministry data.

India - which imports more than 85 per cent of its oil - is among the few remaining buyers of Russian crude, a key source of revenue for President Vladimir Putin's regime. Evaporating European demand is putting severe pressure on Russia's oil industry, with the government forecasting output could drop by as much as 17 per cent this year.

Flows of Russian oil to India are not sanctioned, but tightening international restrictions in areas such as marine insurance and pressure on New Delhi from the United States are making the trade more difficult. Prime Minister Narendra Modi has so far resisted Western encouragement to scale back its relationship with Moscow because of the opportunity to get heavily discounted oil. India is also highly dependent on imports of Russian weapons.

India's state-run refiners can take about 15 million barrels a month – about a tenth of overall imports – if Russia agrees to the price demands and delivers the oil to India, the people said. Government-affiliated processors will stand to benefit from any potential agreement, they said. Private refiners such as Reliance Industries and Nayara Energy typically procure their feedstock individually.

Moscow is looking at ways to keep supplies flowing to India - both from the west via the Baltic Sea and on routes from the Russian Far East that become more accessible during the summer, the people said.

The two countries have even been exploring rerouting some crude through Vladivostok in the Far East. While the sea trip from there to India will be quicker, there will likely be major costs and logistical hurdles.

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