Since the start of the Russia-Ukraine war at the end of February, the share of Russian crude in India’s oil basket has increased significantly as the country offered huge discounts amid its boycott by developed countries. Recently, Russia had also overtaken Saudi Arabia to be the second-biggest supplier of crude oil in India before the latter again claimed the spot.
After Russian President Vladimir Putin approved a special military operation in Ukraine’s Donbass region on February 24, the prices of crude oil soared to as high as about $140 per barrel. The prices had hit $100 per barrel for the first time since 2014.
Russia’s Share In India’s Crude Oil Basket
Before the Russia-Ukraine war, the share of Russia in India’s crude oil basket was less than 2 per cent. In the whole year 2021, India bought just 12 million barrels of the oil from Russia, which is only 2 per cent of the country’s total imports. India’s own domestic production is more than that. Now, the share has witnessed a significant increase to 12 per cent.
India increased Russian oil imports by 4.7 times during April-May 2022, or by more than 400,000 barrels per day (bpd), year-on-year, thanks to a price discount. The Russia-Ukraine conflict started at the end of February. In the three months of the Russia-Ukraine war, India spent $5.1 billion on Russian oil, gas and coal, more than five times the value of a year ago.
Recently, Finance Minister Nirmala Sitharaman said importing Russian oil was part of India’s strategy to manage inflation. She added that other countries were also following similar strategies. She said Russian oil share in India’s crude basket increased to 12-13 per cent within a couple of months of discount, compared with about 2 per cent of Russian component in February. India imports over 80 per cent of its crude oil requirements.
External Affairs Minister S Jaishankar in March also said, “When oil prices go up, it’s natural for countries to look for good deals for their people.”
Russian oil arrivals into India for May were at 740,000 barrels a day, up from 284,000 barrels in April and 34,000 barrels a year earlier, according to data from Kpler.
How India Has Gained
After the war started and the developed countries shunned its supply, Russia offered as much as $35 per barrel discounts on the crude oil prices prevailing before the Russia-Ukraine war. According to a Times of India report, India has gained nearly Rs 35,000 crore by importing Russian crude at a discounted price since the start of the Russia-Ukraine war in February.
The report said it is the second time of bargain hunting in the crude oil. In 2020 also, when oil prices crashed amid the pandemic-induced lockdown across the world, the government filled up strategic reserves and refiners stored oil in ships to save Rs 25,000 crore when prices rose later.
The discount has helped India control inflation in the country as well as save dollars, which bolstered the rupee from sliding further.