Earlier this month, Russia reached out to India with a discount of 20% on oil barrels, following which Indian Petroleum and Natural Gas Minister Hardeep Singh Puri confirmed that a deal had been struck for 3.5 million barrels via a rupee-ruble trading mechanism. Amid a global rise in energy prices, External Affairs Ministry spokesman Arindam Bagchi said India is exploring all avenues in the global energy market, including increasing imports from Russia, which he said has not been a “major oil supplier” to India.
The Indian Oil Corporation purchased three million barrels of Russian oil since the invasion began on February 24. In fact, the Financial Times recently reported that India has imported 360,000 barrels per day in March, a fourfold increase from 2021.
Moreover, during a conversation with Puri two weeks ago, Russian Deputy Prime Minister Alexander Novak declared that this level of trade could go up even further, saying, “We are interested in further attracting Indian investment to the Russian oil and gas sector and expanding Russian companies’ sales networks in India.”
However, India’s landmark deal with Russia has come with several detractors, with Western actors criticising New Delhi for providing Moscow with an economic lifeline as they tighten the noose with ever-expanding sanctions. In this respect, United States (US) White House Press Secretary Jen Psaki warned India against being on the wrong side of history. Likewise, US President Joe Biden called India’s response to the Ukraine crisis “shaky” compared to its other Quad partners (the US, Japan, and Australia), which have all condemned and sanctioned Russia.
This rhetoric has gained steam among Western journalists, who have employed a "with us or against us" narrative and even called for sanctions, though the Biden administration and Australia have both underscored that this is not being considered.
Jen Psaki on if India accepts Russian oil at a reduced costs: "[T]hink about where you want to stand when the history books are written in this moment in time, and support for the Russian leadership is support for an invasion that obviously is having a devastating impact." pic.twitter.com/M8AqWaEjol
— Curtis Houck (@CurtisHouck) March 15, 2022
If INDIA buys Russian crude oil,
— Trish Regan (@trish_regan) March 14, 2022
INDIA should expect to be sanctioned by the United States.
And, believe me, that won’t work out so well for India’s economy.
Right now: you’re with US or you’re against us. Simple.
Russia is killing hundreds of civilians, bombing Ukraine into a sea of rubble & all India can do is strike cheap oil import deals from Russia?
— Mahua Moitra (@MahuaMoitra) March 20, 2022
Sorry but is this what “looking out for self-interest” diplomacy entails?
India, for its part, has responded to this furore by stressing that its “legitimate oil transactions” must not be politicised and that “countries with oil self-sufficiency or those importing themselves from Russia cannot credibly advocate restrictive trading.” Government sources have indicated that India had little choice but to press ahead with the deal because “pressure for competitive sourcing has naturally increased,” pointing to the fact that India has already had to suspend energy imports from Iran and Venezuela due to the US sanctions. Moreover, alternative suppliers have been deemed financially prohibitive. In essence, New Delhi has said that it will not discriminate based on who the supplier; rather, it will “explore [the] best options” from “all producers.”
Although this decision to put its interests first has generated tensions with allies, equally it has garnered praise from unfamiliar sources. Pakistani Prime Minister Imran Khan, for instance, has lauded India for pursuing an “independent foreign policy” despite being a Quad member.
India is importing oil from Russia despite being a member of QUAD with USA. I salute India and its foreign policy for this. : Pak Prime Minister Imran Khan pic.twitter.com/vmm7evwM5U
— Ashish (@aashishNRP) March 20, 2022
All things considered, India’s decision to purchase discounted oil from Russia appears to be a no-brainer. Rather than wading in on a conflict that it is not involved in, it has chosen to prioritise economic interests over geopolitics, not only because of its strategic independence but also because of heavy market volatility, a surge in global energy prices, and its heavy dependence on imports.
In the current financial year ending on March 31, India’s crude oil import bill is set to exceed $100 billion. In comparison, from April 1, 2021 to January 2022, India spent $94.3 billion. In January 2022 alone, India spent $11.6 billion compared to $7.7 billion in January 2021. In February, as oil prices exceeded $100 per barrel, India almost doubled its import bill to $110 - $115 billion in the current financial year (2021 - 2022). In fact, global crude prices have increased from $80 a barrel on November 4 to around $130 in March. It is therefore no surprise that India has said that it is “happy to take” Russia’s offer, as rejecting it would hamper its post-pandemic recovery, increase inflation, and add its already spiralling import bills for no other reason than to pacify Western forces.
India currently imports 85% of its crude oil (approximately 5 million barrels a day) and is the world’s third-largest energy consumer; its major suppliers are Iraq (23%), Saudi Arabia (18%), the United Arab Emirates (11%), and the US (7.3%). In 2022, imports from the US are likely to increase by 11%, to reach a market share of 8%. In contrast, oil and gas imports from Russia make up less than 5% of India’s total oil imports. Between April 2021 and January 2022, India imported 176 million tonnes of oil, of which only 3.6 million came from Russia. However, we are now on the verge of a massive shift in India’s energy portfolio.
Indian companies who were earlier discouraged by high shipping costs from Russia have been incentivised by Russia now reducing its prices and even offering to foot the bill for insurance costs and safe passage. In this respect, Lars Barstad, the chief executive of Frontline, a New York-listed tanker company, has said that Moscow is offering a discount on Russian Urals crude of $25-$30 a barrel, while shipping charges come out to roughly $3-$4 per barrel, easily offsetting the freight cost. As a result of this lucrative offer, India’s demand for oil in 2022 is expected to increase by 8.2 % to 5.5 million barrels per day.
India defends buying discounted crude oil from Russia. The govt doesn't need to explain its decision to the West. But it does need to explain to Indians whether it will pass on the discount to the common man or pocket it in the name of fuel excise at a time of record inflation!
— Dr. Shama Mohamed (@drshamamohd) March 19, 2022
Purchasing oil from Russia is a purely economic decision for a developing country and cannot be interpreted as tacit support for the Russian invasion of Ukraine. In fact, unlike several Western powers, India has kept diplomatic corridors open with both Russia and Ukraine. In contrast, Germany, Netherlands, France, and Italy have all escaped Biden’s wrath despite remaining heavily dependent on Russian oil and gas imports and signalling their unwillingness to impose an embargo. Unlike India, which has been clear in its intentions and its priorities, these countries have instead sought to present themselves as protectors of Ukraine while exploiting the loopholes in their own sanctions to fulfil their energy needs. For instance, the sanctions exclude key Russian banks, allowing European powers to continue paying for Russian energy imports. Yet, India has been singled out for a trade relationship that makes up less than 5% of its energy portfolio. Keeping in mind the surging energy prices, its heavy dependence on imports, inflationary pressures, post-pandemic recovery efforts, its non-involvement in the Ukraine war, its desire to maintain strategic independence, the hypocrisy of Western actors, and most importantly the sheer irresistibility of Russia’s offer, India’s decision was an easy one.